BILL NUMBER: SB 2002	CHAPTERED  09/30/00

	CHAPTER   1003
	FILED WITH SECRETARY OF STATE   SEPTEMBER 30, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 29, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 30, 2000
	AMENDED IN ASSEMBLY   AUGUST 29, 2000
	AMENDED IN ASSEMBLY   AUGUST 25, 2000
	AMENDED IN ASSEMBLY   JUNE 28, 2000
	AMENDED IN ASSEMBLY   JUNE 21, 2000

INTRODUCED BY   Committee on Judiciary (Senators Schiff (Chair),
Burton, Escutia, O'Connell, and Sher)

                        FEBRUARY 25, 2000

   An act to amend Sections 2924f and 3440.5 of the Civil Code, to
amend Sections 1201, 2210, 2502, 9102, 9104, 9205, 9210, 9307, 9311,
9317, 9319, 9323, 9325, 9331, 9336, 9407, 9408, 9502, 9505, 9509,
9513, 9519, 9524, 9525, 9608, 9611, 9613, 9615, 9625, 9626, 9702, and
9705 of, to amend and renumber Section 9708 of, to amend, renumber,
and add Section 9707 of, and to repeal and add Sections 9403, 9404,
9405, 9406, and 9409 of, the Commercial Code, and to amend Sections
12183 and 12194 of, and to add Section 27291 to, the Government Code,
relating to commercial law.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 2002, Committee on Judiciary.    Commercial law:  secured
transactions.
   Existing provisions of the Uniform Commercial Code govern security
interests in personal property and fixtures, as well as certain
sales of accounts, contract rights, and chattel paper.  These
provisions will, pursuant to Chapter 991 of the Statutes of 1999, be
repealed and replaced with new provisions concerning these subjects,
to be operative on July 1, 2001.  However, because Chapter 991 of the
Statutes of 1999 contains a provision deferring to other bills
passed by the Legislature during the 1999 calendar year, certain
existing provisions relating to fees charged by the Secretary of
State, which were enacted as Chapter 1000 of the Statutes of 1999,
were not repealed because they were the subject of legislation in
1999, and those existing provisions will duplicate and be
inconsistent with the new provisions enacted by Chapter 991 of the
Statutes of 1999 as of July 1, 2001.
   This bill would repeal those existing duplicate provisions as of
July 1, 2001, and would reenact the new provisions previously enacted
by Chapter 991 of the Statutes of 1999 to incorporate the changes of
Chapter 1000 of the Statutes of 1999, thereby reconciling both
chapters.  This bill would make other technical, conforming, and
clarifying changes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 2924f of the Civil Code is amended to read:
   2924f.  (a) As used in this section and Sections 2924g and 2924h,
"property" means real property or a leasehold estate therein, and
"calendar week" means Monday through Saturday, inclusive.
   (b) (1) Except as provided in subdivision (c), before any sale of
property can be made under the power of sale contained in any deed of
trust or mortgage, or any resale resulting from a rescission for a
failure of consideration pursuant to subdivision (c) of Section
2924h, notice of the sale thereof shall be given by posting a written
notice of the time of sale and of the street address and the
specific place at the street address where the sale will be held, and
describing the property to be sold, at least 20 days before the date
of sale in one public place in the city where the property is to be
sold, if the property is to be sold in a city, or, if not, then in
one public place in the judicial district in which the property is to
be sold, and publishing a copy once a week for three consecutive
calendar weeks, the first publication to be at least 20 days before
the date of sale, in a newspaper of general circulation published in
the city in which the property or some part thereof is situated, if
any part thereof is situated in a city, if not, then in a newspaper
of general circulation published in the judicial district in which
the property or some part thereof is situated, or in case no
newspaper of general circulation is published in the city or judicial
district, as the case may be, in a newspaper of general circulation
published in the county in which the property or some part thereof is
situated, or in case no newspaper of general circulation is
published in the city or judicial district or county, as the case may
be, in a newspaper of general circulation published in the county in
this state that (A) is contiguous to the county in which the
property or some part thereof is situated and (B) has, by comparison
with all similarly contiguous counties, the highest population based
upon total county population as determined by the most recent federal
decennial census published by the Bureau of the Census.  A copy of
the notice of sale shall also be posted in a conspicuous place on the
property to be sold at least 20 days before the date of sale, where
possible and where not restricted for any reason.  If the property is
a single-family residence the posting shall be on a door of the
residence, but, if not possible or restricted, then the notice shall
be posted in a conspicuous place on the property; however, if access
is denied because a common entrance to the property is restricted by
a guard gate or similar impediment, the property may be posted at
that guard gate or similar impediment to any development community.
Additionally, the notice of sale shall conform to the minimum
requirements of Section 6043 of the Government Code and be recorded
with the county recorder of the county in which the property or some
part thereof is situated at least 14 days prior to the date of sale.
The notice of sale shall contain the name, street address in this
state, which may reflect an agent of the trustee, and either a
toll-free telephone number or telephone number in this state of the
trustee, and the name of the original trustor, and also shall contain
the statement required by paragraph (3) of subdivision (c).  In
addition to any other description of the property, the notice shall
describe the property by giving its street address, if any, or other
common designation, if any, and a county assessor's parcel number;
but if the property has no street address or other common
designation, the notice shall contain a legal description of the
property, the name and address of the beneficiary at whose request
the sale is to be conducted, and a statement that directions may be
obtained pursuant to a written request submitted to the beneficiary
within 10 days from the first publication of the notice.  Directions
shall be deemed reasonably sufficient to locate the property if
information as to the location of the property is given by reference
to the direction and approximate distance from the nearest
crossroads, frontage road, or access road.  If a legal description or
a county assessor's parcel number and either a street address or
another common designation of the property is given, the validity of
the notice and the validity of the sale shall not be affected by the
fact that the street address, other common designation, name and
address of the beneficiary, or the directions obtained therefrom are
erroneous or that the street address, other common designation, name
and address of the beneficiary, or directions obtained therefrom are
omitted.  The term "newspaper of general circulation," as used in
this section, has the same meaning as defined in Article 1
(commencing with Section 6000) of Chapter 1 of Division 7 of Title 1
of the Government Code.
   The notice of sale shall contain a statement of the total amount
of the unpaid balance of the obligation secured by the property to be
sold and reasonably estimated costs, expenses, advances at the time
of the initial publication of the notice of sale, and, if republished
pursuant to a cancellation of a cash equivalent pursuant to
subdivision (d) of Section 2924h, a reference of that fact; provided,
that the trustee shall incur no liability for any good faith error
in stating the proper amount, including any amount provided in good
faith by or on behalf of the beneficiary.  An inaccurate statement of
this amount shall not affect the validity of any sale to a bona fide
purchaser for value, nor shall the failure to post the notice of
sale on a door as provided by this subdivision affect the validity of
any sale to a bona fide purchaser for value.
   (2) If the sale of the property is to be a unified sale as
provided in subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, the notice of sale shall also
contain a description of the personal property or fixtures to be
sold.  In the case where it is contemplated that all of the personal
property or fixtures are to be sold, the description in the notice of
the personal property or fixtures shall be sufficient if it is the
same as the description of the personal property or fixtures
contained in the agreement creating the security interest in or
encumbrance on the personal property or fixtures or the filed
financing statement relating to the personal property or fixtures.
In all other cases, the description in the notice shall be sufficient
if it would be a sufficient description of the personal property or
fixtures under Section 9108 of the Commercial Code.  Inclusion of a
reference to or a description of personal property or fixtures in a
notice of sale hereunder shall not constitute an election by the
secured party to conduct a unified sale pursuant to subparagraph (B)
of paragraph (1) of subdivision (a) of Section 9604 of the Commercial
Code, shall not obligate the secured party to conduct a unified sale
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, and in no way shall render
defective or noncomplying either that notice or a sale pursuant to
that notice by reason of the fact that the sale includes none or less
than all of the personal property or fixtures referred to or
described in the notice.  This paragraph shall not otherwise affect
the obligations or duties of a secured party under the Commercial
Code.
   (c) (1) This subdivision applies only to deeds of trust or
mortgages which contain a power of sale and which are secured by real
property containing a single-family, owner-occupied residence, where
the obligation secured by the deed of trust or mortgage is contained
in a contract for goods or services subject to the provisions of the
Unruh Act (Chapter 1 (commencing with Section 1801) of Title 2 of
Part 4 of Division 3).
   (2) Except as otherwise expressly set forth in this subdivision,
all other provisions of law relating to the exercise of a power of
sale shall govern the exercise of a power of sale contained in a deed
of trust or mortgage described in paragraph (1).
   (3) If any default of the obligation secured by a deed of trust or
mortgage described in paragraph (1) has not been cured within 30
days after the recordation of the notice of default, the trustee or
mortgagee shall mail to the trustor or mortgagor, at his or her last
known address, a copy of the following statement:


YOU ARE IN DEFAULT UNDER A
___________________________________________________,
            (Deed of trust or mortgage)
DATED ______.  UNLESS YOU TAKE ACTION TO PROTECT
YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE.
IF YOU NEED AN EXPLANATION OF THE NATURE OF THE
PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER.

   (4) All sales of real property pursuant to a power of sale
contained in any deed of trust or mortgage described in paragraph (1)
shall be held in the county where the residence is located and shall
be made to the person making the highest offer.  The trustee may
receive offers during the 10-day period immediately prior to the date
of sale and if any offer is accepted in writing by both the trustor
or mortgagor and the beneficiary or mortgagee prior to the time set
for sale, the sale shall be postponed to a date certain and prior to
which the property may be conveyed by the trustor to the person
making the offer according to its terms.  The offer is revocable
until accepted.  The performance of the offer, following acceptance,
according to its terms, by a conveyance of the property to the
offeror, shall operate to terminate any further proceeding under the
notice of sale and it shall be deemed revoked.
   (5) In addition to the trustee fee pursuant to Section 2924c, the
trustee or mortgagee pursuant to a deed of trust or mortgage subject
to this subdivision shall be entitled to charge an additional fee of
fifty dollars ($50).
   (6) This subdivision applies only to property on which notices of
default were filed on or after the effective date of this
subdivision.
  SEC. 2.  Section 3440.5 of the Civil Code, as amended by Chapter
991 of the Statutes of 1999, is amended to read:
   3440.5.  (a) This chapter does not affect the rights of a secured
party who, for value and in good faith, acquires a security interest
in the transferred personal property from the transferee, or from the
transferee's successor in interest, if the transferor is no longer
in possession of the personal property at the time the security
interest attaches.
   (b) Additionally, except as provided in Section 3440.3, this
chapter does not affect the rights of a secured party who acquires a
security interest from the transferee, or from the transferee's
successor in interest, in the personal property, if all of the
following conditions are satisfied:
   (1) On or before the date the security agreement is executed, the
intended debtor or secured party files a financing statement with
respect to the property transferred, signed by the intended debtor.
The financing statement shall be filed in the office of the Secretary
of State in accordance with Chapter 5 (commencing with Section 9501)
of Division 9 of the Commercial Code, but shall use the terms
"transferor" in lieu of "debtor," "transferee" in lieu of "secured
party," and "secured party" in lieu of "assignee of secured party."
The provisions of Chapter 5 (commencing with Section 9501) of
Division 9 of the Commercial Code shall apply as appropriate to such
a statement.  For the purpose of indexing, and in any certification
of search, the Secretary of State may refer to any financing
statement filed pursuant to this paragraph as a financing statement
under the Commercial Code and may describe the transferor as a debtor
and the transferee as a secured party.
   Compliance with this paragraph shall, however, not perfect the
security interest of the secured party.  Perfection of such a
security interest shall be governed by Division 9 (commencing with
Section 9101) of the Commercial Code.
   (2) The intended debtor or secured party publishes a notice of the
transfer one time in a newspaper of general circulation published in
the judicial district in which the personal property is located, if
there is one, and if there is none in the judicial district, then in
a newspaper of general circulation in the county embracing the
judicial district.  The publication shall be completed not less than
10 days before the date of execution by the intended debtor of the
intended security agreement.  The notice shall contain the names and
addresses of the transferor and transferee and of the intended debtor
and secured party, a general statement of the character of the
personal property transferred and intended to be subject to the
security interest, the location of the personal property, and the
date on or after which the security agreement is to be executed by
the intended debtor.
  SEC. 3.  Section 1201 of the Commercial Code is amended to read:
   1201.  The following definitions apply for purposes of this code,
subject to additional definitions contained in the subsequent
divisions of this code that apply to specific divisions or chapters
thereof, and unless the context otherwise requires:
   (1) "Action," in the sense of a judicial proceeding, includes
recoupment, counterclaim, setoff, suit in equity, and any other
proceedings in which rights are determined.
   (2) "Aggrieved party" means a party entitled to resort to a
remedy.
   (3) "Agreement" means the bargain of the parties in fact as found
in their language or by implication from other circumstances,
including course of dealing, usage of trade, and course of
performance as provided in this code (Sections 1205, 2208, and
10207).  Whether an agreement has legal consequences is determined by
the provisions of this code, if applicable, and otherwise by the law
of contracts (Section 1103).  (Compare "contract.")
   (4) "Bank" means any person engaged in the business of banking.
   (5) "Bearer" means the person in possession of an instrument,
document of title, or certificated security payable to bearer or
endorsed in blank.
   (6) "Bill of lading" means a document evidencing the receipt of
goods for shipment issued by a person engaged in the business of
transporting or forwarding goods, and that, by its terms, evidences
the intention of the issuer that the person entitled under the
document (Section 7403(4)) has the right to receive, hold, and
dispose of the document and the goods it covers.  Designation of a
document by the issuer as a "bill of lading" is conclusive evidence
of that intention.  "Bill of lading" includes an airbill.  "Airbill"
means a document serving for air transportation as a bill of lading
does for marine or rail transportation, and includes an air
consignment note or air waybill.
   (7) "Branch" includes a separately incorporated foreign branch of
a bank.
   (8) "Burden of establishing" a fact means the burden of persuading
the triers of fact that the existence of the fact is more probable
than its nonexistence.
   (9) "Buyer in ordinary course of business" means a person that
buys goods in good faith, without knowledge that the sale violates
the rights of another person in the goods, and in the ordinary course
from a person, other than a pawnbroker, in the business of selling
goods of that kind.  A person buys goods in the ordinary course if
the sale to the person comports with the usual or customary practices
in the kind of business in which the seller is engaged or with the
seller's own usual or customary practices.  A person that sells oil,
gas, or other minerals at the wellhead or minehead is a person in the
business of selling goods of that kind.  A buyer in the ordinary
course of business may buy for cash, by exchange of other property,
or on secured or unsecured credit, and may acquire goods or documents
of title under a preexisting contract for sale.  Only a buyer that
takes possession of the goods or has a right to recover the goods
from the seller under Division 2 (commencing with Section 2101) may
be a buyer in ordinary course of business.  A person that acquires
goods in a transfer in bulk or as security for or in total or partial
satisfaction of a money debt is not a buyer in ordinary course of
business.
   (10) "Conspicuous."  A term or clause is conspicuous when it is so
written that a reasonable person against whom it is to operate ought
to have noticed it.  A printed heading in capitals (as:
NONNEGOTIABLE BILL OF LADING) is conspicuous.  Language in the body
of a form is "conspicuous" if it is in larger or other contrasting
type or color, except that in a telegram any stated term is
"conspicuous." Whether a term or clause is "conspicuous" or not is
for decision by the court.
   (11) "Contract" means the total legal obligation that results from
the parties' agreement as affected by this code and any other
applicable rules of law.  (Compare "agreement.")
   (12) "Creditor" includes a general creditor, a secured creditor, a
lien creditor, and any representative of creditors, including an
assignee for the benefit of creditors, a trustee in bankruptcy, a
receiver in equity, and an executor or administrator of an insolvent
debtor's or assignor's estate.
   (13) "Defendant" includes a person in the position of defendant in
a cross-action or counterclaim.
   (14) "Delivery," with respect to instruments, documents of title,
chattel paper, or certificated securities, means the voluntary
transfer of possession.
   (15) "Document of title" includes a bill of lading, dock warrant,
dock receipt, warehouse receipt, gin ticket, or compress receipt, and
any other document that, in the regular course of business or
financing, is treated as adequately evidencing that the person
entitled under the document (Section 7403(4)) has the right to
receive, hold, and dispose of the document and the goods it covers.
To be a document of title, a document shall purport to be issued by a
bailee and purport to cover goods in the bailee's possession that
either are identified as or are fungible portions of an identified
mass.
   (16) "Fault" means wrongful act, omission, or breach.
   (17) "Fungible," with respect to goods or securities, means goods
or securities of which any unit is, by nature or usage of trade, the
equivalent of any other like unit.  Goods that are not fungible shall
be deemed fungible for the purposes of this code to the extent that,
under a particular agreement or document, unlike units are treated
as equivalents.
   (18) "Genuine" means free of forgery or counterfeiting.
   (19) "Good faith" means honesty in fact in the conduct or
transaction concerned.
   (20) "Holder," with respect to a negotiable instrument, means the
person in possession if the instrument is payable to bearer or, in
the case of an instrument payable to an identified person, if the
identified person is in possession.  "Holder," with respect to a
document of title, means the person in possession if the goods are
deliverable to bearer or to the order of the person in possession.
   (21) To "honor" is to pay or to accept and pay or, where a credit
so engages, to purchase or discount a draft complying with the terms
of the credit.
   (22) "Insolvency proceedings" includes any assignment for the
benefit of creditors or other proceedings intended to liquidate or
rehabilitate the estate of the person involved.
   (23) A person is "insolvent" who either has ceased to pay his or
her debts in the ordinary course of business, cannot pay his or her
debts as they become due, or is insolvent within the meaning of the
federal bankruptcy law.
   (24) "Money" means a medium of exchange authorized or adopted by a
domestic or foreign government and includes a monetary unit of
account established by an intergovernmental organization or by
agreement between two or more nations.
   (25) A person has "notice" of a fact when any of the following
occurs:
   (a) He or she has actual knowledge of it.
   (b) He or she has received a notice or notification of it.
   (c) From all the facts and circumstances known to him or her at
the time in question, he or she has reason to know that it exists.  A
person "knows" or has "knowledge" of a fact when he or she has
actual knowledge of it.  "Discover" or "learn," or a word or phrase
of similar import, refers to knowledge rather than to reason to know.
  The time and circumstances under which a notice or notification may
cease to be effective are not determined by this code.
   (26) A person "notifies" or "gives" a notice or notification to
another by taking those steps that may be reasonably required to
inform the other in ordinary course whether or not the other actually
comes to know of it.  A person "receives" a notice or notification
when any of the following occurs:
   (a) It comes to his or her attention.
   (b) It is duly delivered at the place of business through which
the contract was made or at any other place held out by him or her as
the place for receipt of these communications.
   (27) Notice, knowledge, or a notice or notification received by an
organization is effective for a particular transaction from the time
it is brought to the attention of the individual conducting that
transaction and, in any event, from the time it would have been
brought to his or her attention if the organization had exercised due
diligence.  An organization exercises due diligence if it maintains
reasonable routines for communicating significant information to the
person conducting the transaction and there is reasonable compliance
with the routines.  Due diligence does not require an individual
acting for the organization to communicate information unless the
communication is part of his or her regular duties, or unless he or
she has reason to know of the transaction and that the transaction
would be materially affected by the information.
   (28) "Organization" includes a corporation, government or
governmental subdivision or agency, business trust, estate, trust,
partnership or association, two or more persons having a joint or
common interest, or any other legal or commercial entity.
   (29) "Party," as distinct from "third party," means a person who
has engaged in a transaction or made an agreement within this
division.
   (30) "Person" includes an individual or an organization.  (See
Section 1102.)
   (31) "Purchase" includes taking by sale, discount, negotiation,
mortgage, pledge, lien, security interest, issue or reissue, gift, or
any other voluntary transaction creating an interest in property.
   (32) "Purchaser" means a person who takes by purchase.
   (33) "Remedy" means any remedial right to which an aggrieved party
is entitled with or without resort to a tribunal.
   (34) "Representative" includes an agent, an officer of a
corporation or association, a trustee, executor, or administrator of
an estate, or any other person empowered to act for another.
   (35) "Rights" includes remedies.
   (36) (a) "Security interest" means an interest in personal
property or fixtures that secures payment or performance of an
obligation.  The term also includes any interest of a cosignor and a
buyer of accounts, chattel paper, a payment intangible, or a
promissory note in a transaction that is subject to Division 9
(commencing with Section 9101).  The special property interest of a
buyer of goods on identification of those goods to a contract for
sale under Section 2401 is not a "security interest," but a buyer may
also acquire a "security interest" by complying with Division 9
(commencing with Section 9101).   Except as otherwise provided in
Section 2505, the right of a seller or lessor of goods under
Division 2 (commencing with Section 2101) or  Division 10 (commencing
with Section 10101) to retain or acquire possession of the goods is
not a "security interest," but a seller or lessor may also acquire a
"security interest" by complying with Division 9 (commencing with
Section 9101).  The retention or reservation of title by a seller of
goods notwithstanding shipment or delivery to the buyer (Section
2401) is limited in effect to a reservation of a "security interest."

   (b) Whether a transaction creates a lease or security interest is
determined by the facts of each case.  However, a transaction creates
a security interest if the consideration the lessee is to pay the
lessor for the right to possession and use of the goods is an
obligation for the term of the lease not subject to termination by
the lessee, and any of the following conditions applies:
   (i) The original term of the lease is equal to or greater than the
remaining economic life of the goods.
   (ii) The lessee is bound to renew the lease for the remaining
economic life of the goods or is bound to become the owner of the
goods.
   (iii) The lessee has an option to renew the lease for the
remaining economic life of the goods for no additional consideration
or nominal additional consideration upon compliance with the lease
agreement.
   (iv) The lessee has an option to become the owner of the goods for
no additional consideration or nominal additional consideration upon
compliance with the lease agreement.
   (c) A transaction does not create a security interest merely
because it provides one or more of the following:
   (i) That the present value of the consideration the lessee is
obligated to pay the lessor for the right to possession and use of
the goods is substantially equal to or greater than the fair market
value of the goods at the time the lease is entered into.
   (ii) That the lessee assumes the risk of loss of the goods, or
agrees to pay the taxes, insurance, filing, recording, or
registration fees, or service or maintenance costs with respect to
the goods.
   (iii) That the lessee has an option to renew the lease or to
become the owner of the goods.
   (iv) That the lessee has an option to renew the lease for a fixed
rent that is equal to or greater than the reasonably predictable fair
market rent for the use of the goods for the term of the renewal at
the time the option is to be performed.
   (v) That the lessee has an option to become the owner of the goods
for a fixed price that is equal to or greater than the reasonably
predictable fair market value of the goods at the time the option is
to be performed.
   (vi) In the case of a motor vehicle, as defined in Section 415 of
the Vehicle Code, or a trailer, as defined in  Section 630 of that
code, that is not to be used primarily for personal, family, or
household purposes, that the amount of rental payments may be
increased or decreased by reference to the amount realized by
                                           the lessor upon sale or
disposition of the vehicle or trailer.  Nothing in this subparagraph
affects the application or administration of the Sales and Use Tax
Law (Part 1 (commencing with Section 6001), Division 2, Revenue and
Taxation Code).
   (d) For purposes of this subdivision (36), all of the following
apply:
   (i) Additional consideration is not nominal if (A) when the option
to renew the lease is granted to the lessee, the rent is stated to
be the fair market rent for the use of the goods for the term of the
renewal determined at the time the option is to be performed, or (B)
when the option to become the owner of the goods is granted to the
lessee, the price is stated to be the fair market value of the goods
determined at the time the option is to be performed.  Additional
consideration is nominal if it is less than the lessee's reasonably
predictable cost of performing under the lease agreement if the
option is not exercised.
   (ii) "Reasonably predictable" and "remaining economic life of the
goods" are to be determined with reference to the facts and
circumstances at the time the transaction is entered into.
   (iii) "Present value" means the amount as of a date certain of one
or more sums payable in the future, discounted to the date certain.
The discount is determined by the interest rate specified by the
parties if the rate is not manifestly unreasonable at the time the
transaction is entered into; otherwise, the discount is determined by
a commercially reasonable rate that takes into account the facts and
circumstances of each case at the time the transaction was entered
into.
   (37) "Send," in connection with any writing or notice, means to
deposit in the mail or deliver for transmission by any other usual
means of communication with postage or cost of transmission provided
for and properly addressed and, in the case of an instrument, to an
address specified thereon or otherwise agreed or, if there  is none,
to any address reasonable under the circumstances.  The receipt of
any writing or notice within the time  in which it would have arrived
if properly sent has the effect of a proper sending.  When a writing
or notice is required to be sent by registered or certified mail,
proof of mailing is sufficient, and proof of receipt by the addressee
is not required unless the words "with return receipt requested" are
also used.
   (38) "Signed" includes any symbol executed or adopted by a party
with present intention to authenticate a writing.
   (39) "Surety" includes guarantor.
   (40) "Telegram" includes a message transmitted by radio, teletype,
cable, any mechanical method of transmission, or the like.
   (41) "Term" means that portion of an agreement that relates to a
particular matter.
   (42) "Unauthorized" signature means one made without actual,
implied, or apparent authority, and includes a forgery.
   (43) "Value."  Except as otherwise provided with respect to
negotiable instruments and bank collections (Sections 3303, 4210, and
4211), a person gives "value" for rights if he or she acquires them
in any of the following ways:
   (a) In return for a binding commitment to extend credit or for the
extension of immediately available credit whether or not drawn upon
and whether or not a chargeback is provided for in the event of
difficulties in collection.
   (b) As security for, or in total or partial satisfaction of, a
preexisting claim.
   (c) By accepting delivery pursuant to a preexisting contract for
purchase.
   (d) Generally, in return for any consideration sufficient to
support a simple contract.
   (44) "Warehouse receipt" means a document evidencing the receipt
of goods for storage issued by a warehouseman (Section 7102), and
that, by its terms, evidences the intention of the issuer that the
person entitled under the document (Section 7403(4)) has the right to
receive, hold, and dispose of the document and the goods it covers.
Designation of a document by the issuer as a "warehouse receipt" is
conclusive evidence of that intention.
   (45) "Written" or "writing" includes printing, typewriting, or any
other intentional reduction to tangible form.
  SEC. 4.  Section 2210 of the Commercial Code is amended to read:
   2210.  (1) A party may perform his or her duty through a delegate
unless otherwise agreed or unless the other party has a substantial
interest in having his or her original promisor perform or control
the acts required by the contract.  No delegation of performance
relieves the party delegating of any duty to perform or any liability
for breach.
   (2) Except as otherwise provided in Section 9406, unless otherwise
agreed, all rights of either seller or buyer can be assigned except
where the assignment would materially change the duty of the other
party, or increase materially the burden or risk imposed on him or
her by his or her contract, or impair materially his or her chance of
obtaining return performance.   A right to damages for breach of the
whole contract or a right arising out of the assignor's due
performance of his or her entire obligation can be assigned despite
agreement otherwise.
   (3) The creation, attachment, perfection, or enforcement of a
security interest in the seller's interest under a contract is not a
transfer that materially changes the duty of, or increases materially
the burden or risk imposed on, the buyer or impairs materially the
buyer's chance of obtaining return performance within the purview of
subdivision (2) unless, and then only to the extent that, enforcement
actually results in a delegation of material performance of the
seller.  Even in that event, the creation, attachment, perfection,
and enforcement of the security interest remain effective, but (A)
the seller is liable to the buyer for damages caused by the
delegation to the extent that the damages could not reasonably be
prevented by the buyer, and (B) a court having jurisdiction may grant
other appropriate relief, including cancellation of the contract for
sale or an injunction against enforcement of the security interest
or consummation of the enforcement.
   (4) Unless the circumstances indicate the contrary, a prohibition
of assignment of "the contract" is to be construed as barring only
the delegation to the assignee of the assignor's performance.
   (5) An assignment of "the contract" or of "all my rights under the
contract" or an assignment in similar general terms is an assignment
of rights and, unless the language or the circumstances (as in an
assignment for security) indicate the contrary, it is a delegation of
performance of the duties of the assignor, and its acceptance by the
assignee constitutes a promise by him or her to perform those
duties.  This promise is enforceable by either the assignor or the
other party to the original contract.
   (6) The other party may treat any assignment which delegates
performance as creating reasonable grounds for insecurity and may,
without prejudice to his or her rights against the assignor, demand
assurances from the assignee (Section 2609).
  SEC. 5.  Section 2502 of the Commercial Code is amended to read:
   2502.  (1) Subject to subdivisions (2) and (3), and even though
the goods have not been shipped, a buyer who has paid a part or all
of the price of goods in which he or she has a special property under
the provisions of the immediately preceding section may on making
and keeping good a tender of any unpaid portion of their price
recover them from the seller if either:
   (a) In the case of goods bought for personal, family, or household
purposes, the seller repudiates or fails to deliver as required by
the contract.
   (b) In all cases, the seller becomes insolvent within 10 days
after receipt of the first installment on their price.
   (2) The buyer's right to recover the goods under paragraph (a) of
subdivision (1) vests upon acquisition of a special property, even if
the seller had not then repudiated or failed to deliver.
   (3) If the identification creating his or her special property has
been made by the buyer, he or she acquires the right to recover the
goods only if they conform to the contract for sale.
  SEC. 6.  Section 9102 of the Commercial Code is amended to read:
   9102.  (a) In this division:
   (1) "Accession" means goods that are physically united with other
goods in such a manner that the identity of the original goods is not
lost.
   (2) "Account," except as used in "account for," means a right to
payment of a monetary obligation, whether or not earned by
performance, (i) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (ii) for services
rendered or to be rendered, (iii) for a policy of insurance issued or
to be issued, (iv) for a secondary obligation incurred or to be
incurred, (v) for energy provided or to be provided, (vi) for the use
or hire of a vessel under a charter or other contract, (vii) arising
out of the use of a credit or charge card or information contained
on or for use with the card, or (viii) as winnings in a lottery or
other game of chance operated or sponsored by a state, governmental
unit of a state, or person licensed or authorized to operate the game
by a state or governmental unit of a state.  The term includes
health care insurance receivables.  The term does not include (i)
rights to payment evidenced by chattel paper or an instrument, (ii)
commercial tort claims, (iii) deposit accounts, (iv) investment
property, (v) letter-of-credit rights or letters of credit, or (vi)
rights to payment for money or funds advanced or sold, other than
rights arising out of the use of a credit or charge card or
information contained on or for use with the card.
   (3) "Account debtor" means a person obligated on an account,
chattel paper, or general intangible.  The term does not include
persons obligated to pay a negotiable instrument, even if the
instrument constitutes part of chattel paper.
   (4) "Accounting," except as used in "accounting for," means a
record that is all of the following:
   (A) Authenticated by a secured party.
   (B) Indicating the aggregate unpaid secured obligations as of a
date not more than 35 days earlier or 35 days later than the date of
the record.
   (C) Identifying the components of the obligations in reasonable
detail.
   (5) "Agricultural lien" means an interest, other than a security
interest, in farm products that meets all of the following
conditions:
   (A) It secures payment or performance of an obligation for either
of the following:
   (i) Goods or services furnished in connection with a debtor's
farming operation.
   (ii) Rent on real property leased by a debtor in connection with
its farming operation.
   (B) It is created by statute in favor of a person that does either
of the following:
   (i) In the ordinary course of its business furnished goods or
services to a debtor in connection with a debtor's farming operation.

   (ii) Leased real property to a debtor in connection with the
debtor's farming operation.
   (C) Its effectiveness does not depend on the person's possession
of the personal property.
   (6) "As-extracted collateral" means either of the following:
   (A) Oil, gas, or other minerals that are subject to a security
interest that does both of the following:
   (i) Is created by a debtor having an interest in the minerals
before extraction.
   (ii) Attaches to the minerals as extracted.
   (B) Accounts arising out of the sale at the wellhead or minehead
of oil, gas, or other minerals in which the debtor had an interest
before extraction.
   (7) "Authenticate" means to do either of the following:
   (A) To sign.
   (B) To execute or otherwise adopt a symbol, or encrypt or
similarly process a record in whole or in part, with the present
intent of the authenticating person to identify the person and adopt
or accept a record.
   (8) "Bank" means an organization that is engaged in the business
of banking.  The term includes savings banks, savings and loan
associations, credit unions, and trust companies.
   (9) "Cash proceeds" means proceeds that are money, checks, deposit
accounts, or the like.
   (10) "Certificate of title" means a certificate of title with
respect to which a statute provides for the security interest in
question to be indicated on the certificate as a condition or result
of the security interest's obtaining priority over the rights of a
lien creditor with respect to the collateral.
   (11) "Chattel paper" means a record or records that evidence both
a monetary obligation and a security interest in specific goods, a
security interest in specific goods and software used in the goods, a
security interest in specific goods and license of software used in
the goods, a lease of specific goods, or a lease of specific goods
and license of software used in the goods.  In this paragraph,
"monetary obligation" means a monetary obligation secured by the
goods or owed under a lease of the goods and includes a monetary
obligation with respect to software used in the goods.  The term does
not include (i) charters or other contracts involving the use or
hire of a vessel or (ii) records that evidence a right to payment
arising out of the use of a credit or charge card or information
contained on or for use with the card.  If a transaction is evidenced
by records that include an instrument or series of instruments, the
group of records taken together constitutes chattel paper.
   (12) "Collateral" means the property subject to a security
interest or agricultural lien.  The term includes all of the
following:
   (A) Proceeds to which a security interest attaches.
   (B) Accounts, chattel paper, payment intangibles, and promissory
notes that have been sold.
   (C) Goods that are the subject of a consignment.
   (13) "Commercial tort claim" means a claim arising in tort with
respect to which either of the following conditions is satisfied:
   (A) The claimant is an organization.
   (B) The claimant is an individual and both of the following
conditions are satisfied regarding the claim:
   (i) It arose in the course of the claimant's business or
profession.
   (ii) It does not include damages arising out of personal injury to
or the death of an individual.
   (14) "Commodity account" means an account maintained by a
commodity intermediary in which a commodity contract is carried for a
commodity customer.
   (15) "Commodity contract" means a commodity futures contract, an
option on a commodity futures contract, a commodity option, or
another contract if the contract or option is either of the
following:
   (A) Traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to
federal commodities laws.
   (B) Traded on a foreign commodity board of trade, exchange, or
market, and is carried on the books of a commodity intermediary for a
commodity customer.
   (16) "Commodity customer" means a person for which a commodity
intermediary carries a commodity contract on its books.
   (17) "Commodity intermediary" means a person that is either of the
following:
   (A) Is registered as a futures commission merchant under federal
commodities law.
   (B) In the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as
a contract market pursuant to federal commodities law.
   (18) "Communicate" means to do any of the following:
   (A) To send a written or other tangible record.
   (B) To transmit a record by any means agreed upon by the persons
sending and receiving the record.
   (C) In the case of transmission of a record to or by a filing
office, to transmit a record by any means prescribed by filing-office
rule.
   (19) "Consignee" means a merchant to which goods are delivered in
a consignment.
   (20) "Consignment" means a transaction, regardless of its form, in
which a person delivers goods to a merchant for the purpose of sale
and all of the following conditions are satisfied:
   (A) The merchant satisfies all of the following conditions:
   (i) He or she deals in goods of that kind under a name other than
the name of the person making delivery.
   (ii) He or she is not an auctioneer.
   (iii) He or she is not generally known by its creditors to be
substantially engaged in selling the goods of others.
   (B) With respect to each delivery, the aggregate value of the
goods is one thousand dollars ($1,000) or more at the time of
delivery.
   (C) The goods are not consumer goods immediately before delivery.

   (D) The transaction does not create a security interest that
secures an obligation.
   (21) "Consignor" means a person that delivers goods to a consignee
in a consignment.
   (22) "Consumer debtor" means a debtor in a consumer transaction.
   (23) "Consumer goods" means goods that are used or bought for use
primarily for personal, family, or household purposes.
   (24) "Consumer-goods transaction" means a consumer transaction in
which both of the following conditions are satisfied:
   (A) An individual incurs an obligation primarily for personal,
family, or household purposes.
   (B) A security interest in consumer goods secures the obligation.

   (25) "Consumer obligor" means an obligor who is an individual and
who incurred the obligation as part of a transaction entered into
primarily for personal, family, or household purposes.
   (26) "Consumer transaction" means a transaction in which (i) an
individual incurs an obligation primarily for personal, family, or
household purposes, (ii) a security interest secures the obligation,
and (iii) the collateral is held or acquired primarily for personal,
family, or household purposes.  The term includes consumer-goods
transactions.
   (27) "Continuation statement" means an amendment of a financing
statement which does both of the following:
   (A) Identifies, by its file number, the initial financing
statement to which it relates.
   (B) Indicates that it is a continuation statement for, or that it
is filed to continue the effectiveness of, the identified financing
statement.
   (28) "Debtor" means any of the following:
   (A) A person having an interest, other than a security interest or
other lien, in the collateral, whether or not the person is an
obligor.
   (B) A seller of accounts, chattel paper, payment intangibles, or
promissory notes.
   (C) A consignee.
   (29) "Deposit account" means a demand, time, savings, passbook, or
similar account maintained with a bank.  The term does not include
investment property or accounts evidenced by an instrument.
   (30) "Document" means a document of title or a receipt of the type
described in subdivision (2) of Section 7201.
   (31) "Electronic chattel paper" means chattel paper evidenced by a
record or records consisting of information stored in an electronic
medium.
   (32) "Encumbrance" means a right, other than an ownership
interest, in real property.  The term includes mortgages and other
liens on real property.
   (33) "Equipment" means goods other than inventory, farm products,
or consumer goods.
   (34) "Farm products" means goods, other than standing timber, with
respect to which the debtor is engaged in a farming operation and
which are any of the following:
   (A) Crops grown, growing, or to be grown, including both of the
following:
   (i) Crops produced on trees, vines, and bushes.
   (ii) Aquatic goods produced in aquacultural operations.
   (B) Livestock, born or unborn, including aquatic goods produced in
aquacultural operations.
   (C) Supplies used or produced in a farming operation.
   (D) Products of crops or livestock in their unmanufactured states.

   (35) "Farming operation" means raising, cultivating, propagating,
fattening, grazing, or any other farming, livestock, or aquacultural
operation.
   (36) "File number" means the number assigned to an initial
financing statement pursuant to subdivision (a) of Section 9519.
   (37) "Filing office" means an office designated in Section 9501 as
the place to file a financing statement.
   (38) "Filing-office rule" means a rule adopted pursuant to Section
9526.
   (39) "Financing statement" means a record or records composed of
an initial financing statement and any filed record relating to the
initial financing statement.
   (40) "Fixture filing" means the filing of a financing statement
covering goods that are or are to become fixtures and satisfying
subdivisions (a) and (b) of Section 9502.  The term includes the
filing of a financing statement covering goods of a transmitting
utility which are or are to become fixtures.
   (41) "Fixtures" means goods that have become so related to
particular real property that an interest in them arises under real
property law.
   (42) "General intangible" means any personal property, including
things in action, other than accounts, chattel paper, commercial tort
claims, deposit accounts, documents, goods, instruments, investment
property, letter-of-credit rights, letters of credit, money, and oil,
gas, or other minerals before extraction.  The term includes payment
intangibles and software.
   (43) "Good faith" means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
   (44) "Goods" means all things that are movable when a security
interest attaches.  The term includes (i) fixtures, (ii) standing
timber that is to be cut and removed under a conveyance or contract
for sale, (iii) the unborn young of animals, (iv) crops grown,
growing, or to be grown, even if the crops are produced on trees,
vines, or bushes, and (v) manufactured homes.  The term also includes
a computer program embedded in goods and any supporting information
provided in connection with a transaction relating to the program if
(i) the program is associated with the goods in such a manner that it
customarily is considered part of the goods, or (ii) by becoming the
owner of the goods, a person acquires a right to use the program in
connection with the goods.  The term does not include a computer
program embedded in goods that consist solely of the medium in which
the program is embedded.  The term also does not include accounts,
chattel paper, commercial tort claims, deposit accounts, documents,
general intangibles, instruments, investment property,
letter-of-credit rights, letters of credit, money, or oil, gas, or
other minerals before extraction.
   (45) "Governmental unit" means a subdivision, agency, department,
county, parish, municipality, or other unit of the government of the
United States, a state, or a foreign country.  The term includes an
organization having a separate corporate existence if the
organization is eligible to issue debt on which interest is exempt
from income taxation under the laws of the United States.
   (46) "Health care insurance receivable" means an interest in or
claim under a policy of insurance which is a right to payment of a
monetary obligation for health care goods or services provided.
   (47) "Instrument" means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary
obligation, is not itself a security agreement or lease, and is of a
type that in ordinary course of business is transferred by delivery
with any necessary indorsement or assignment.  The term does not
include (i) investment property, (ii) letters of credit, or (iii)
writings that evidence a right to payment arising out of the use of a
credit or charge card or information contained on or for use with
the card.
   (48) "Inventory" means goods, other than farm products, which are
any of the following:
   (A) Leased by a person as lessor.
   (B) Held by a person for sale or lease or to be furnished under a
contract of service.
   (C) Furnished by a person under a contract of service.
   (D) Consist of raw materials, work in process, or materials used
or consumed in a business.
   (49) "Investment property" means a security, whether certificated
or uncertificated, security entitlement, securities account,
commodity contract, or commodity account.
   (50) "Jurisdiction of organization," with respect to a registered
organization, means the jurisdiction under whose law the organization
is organized.
   (51) "Letter-of-credit right" means a right to payment or
performance under a letter of credit, whether or not the beneficiary
has demanded or is at the time entitled to demand payment or
performance.  The term does not include the right of a beneficiary to
demand payment or performance under a letter of credit.
   (52) (A) "Lien creditor" means any of the following:
   (i) A creditor that has acquired a lien on the property involved
by attachment, levy, or the like.
   (ii) An assignee for benefit of creditors from the time of
assignment.
   (iii) A trustee in bankruptcy from the date of the filing of the
petition.
   (iv) A receiver in equity from the time of appointment.
   (B) "Lien creditor" does not include a creditor who by filing a
notice with the Secretary of State has acquired only an attachment or
judgment lien on personal property, or both.
   (53) "Manufactured home" means a structure, transportable in one
or more sections, which, in the traveling mode, is eight body-feet or
more in width or 40 body-feet or more in length, or, when erected on
site, is 320 or more square feet, and which is built on a permanent
chassis and designed to be used as a dwelling with or without a
permanent foundation when connected to the required utilities, and
includes the plumbing, heating, air-conditioning, and electrical
systems contained therein.  The term includes any structure that
meets all of the requirements of this paragraph except the size
requirements and with respect to which the manufacturer voluntarily
files a certification required by the United States Secretary of
Housing and Urban Development and complies with the standards
established under Title 42 of the United States Code.
   (54) "Manufactured home transaction" means a secured transaction
that satisfies either of the following:
   (A) It creates a purchase money security interest in a
manufactured home, other than a manufactured home held as inventory.

   (B) It is a secured transaction in which a manufactured home,
other than a manufactured home held as inventory, is the primary
collateral.
   (55) "Mortgage" means a consensual interest in real property,
including fixtures, which secures payment or performance of an
obligation.
   (56) "New debtor" means a person that becomes bound as debtor
under subdivision (d) of Section 9203 by a security agreement
previously entered into by another person.
                 (57) "New value" means (i) money, (ii) money's worth
in property, services, or new credit, or (iii) release by a
transferee of an interest in property previously transferred to the
transferee.  The term does not include an obligation substituted for
another obligation.
   (58) "Noncash proceeds" means proceeds other than cash proceeds.
   (59) "Obligor" means a person that, with respect to an obligation
secured by a security interest in or an agricultural lien on the
collateral, (i) owes payment or other performance of the obligation,
(ii) has provided property other than the collateral to secure
payment or other performance of the obligation, or (iii) is otherwise
accountable in whole or in part for payment or other performance of
the obligation.  The term does not include issuers or nominated
persons under a letter of credit.
   (60) "Original debtor," except as used in subdivision (c) of
Section 9310, means a person that, as debtor, entered into a security
agreement to which a new debtor has become bound under subdivision
(d) of Section 9203.
   (61) "Payment intangible" means a general intangible under which
the account debtor's principal obligation is a monetary obligation.
   (62) "Person related to," with respect to an individual, means any
of the following:
   (A) The spouse of the individual.
   (B) A brother, brother-in-law, sister, or sister-in-law of the
individual.
   (C) An ancestor or lineal descendant of the individual or the
individual's spouse.
   (D) Any other relative, by blood or marriage, of the individual or
the individual's spouse who shares the same home with the
individual.
   (63) "Person related to," with respect to an organization, means
any of the following:
   (A) A person directly or indirectly controlling, controlled by, or
under common control with the organization.
   (B) An officer or director of, or a person performing similar
functions with respect to, the organization.
   (C) An officer or director of, or a person performing similar
functions with respect to, a person described in subparagraph (A).
   (D) The spouse of an individual described in subparagraph (A),
(B), or (C).
   (E) An individual who is related by blood or marriage to an
individual described in subparagraph (A), (B), (C), or (D) and shares
the same home with the individual.
   (64) "Proceeds," except as used in subdivision (b) of Section
9609, means any of the following property:
   (A) Whatever is acquired upon the sale, lease, license, exchange,
or other disposition of collateral.
   (B) Whatever is collected on, or distributed on account of,
collateral.
   (C) Rights arising out of collateral.
   (D) To the extent of the value of collateral, claims arising out
of the loss, nonconformity, or interference with the use of, defects
or infringement of rights in, or damage to, the collateral.
   (E) To the extent of the value of collateral and to the extent
payable to the debtor or the secured party, insurance payable by
reason of the loss or nonconformity of, defects or infringement of
rights in, or damage to, the collateral.
   (65) "Promissory note" means an instrument that evidences a
promise to pay a monetary obligation, does not evidence an order to
pay, and does not contain an acknowledgment by a bank that the bank
has received for deposit a sum of money or funds.
   (66) "Proposal" means a record authenticated by a secured party
that includes the terms on which the secured party is willing to
accept collateral in full or partial satisfaction of the obligation
it secures pursuant to Sections 9620, 9621, and 9622.
   (67) "Public finance transaction" means a secured transaction in
connection with which all of the following conditions are satisfied:

   (A) Debt securities are issued.
   (B) All or a portion of the securities issued have an initial
stated maturity of at least 20 years.
   (C) The debtor, obligor, secured party, account debtor or other
person obligated on collateral, assignor or assignee of a secured
obligation, or assignor or assignee of a security interest is a state
or a governmental unit of a state.
   (68) "Pursuant to commitment," with respect to an advance made or
other value given by a secured party, means pursuant to the secured
party's obligation, whether or not a subsequent event of default or
other event not within the secured party's control has relieved or
may relieve the secured party from its obligation.
   (69) "Record," except as used in "for record," "of record,"
"record or legal title," and "record owner," means information that
is inscribed on a tangible medium or which is stored in an electronic
or other medium and is retrievable in perceivable form.
   (70) "Registered organization" means an organization organized
solely under the law of a single state or the United States and as to
which the state or the United States must maintain a public record
showing the organization to have been organized.
   (71) "Secondary obligor" means an obligor to the extent that
either of the following conditions are satisfied:
   (A) The obligor's obligation is secondary.
   (B) The obligor has a right of recourse with respect to an
obligation secured by collateral against the debtor, another obligor,
or property of either.
   (72) "Secured party" means any of the following:
   (A) A person in whose favor a security interest is created or
provided for under a security agreement, whether or not any
obligation to be secured is outstanding.
   (B) A person that holds an agricultural lien.
   (C) A consignor.
   (D) A person to which accounts, chattel paper, payment
intangibles, or promissory notes have been sold.
   (E) A trustee, indenture trustee, agent, collateral agent, or
other representative in whose favor a security interest or
agricultural lien is created or provided for.
   (F) A person that holds a security interest arising under Section
2401, 2505, 4210, or 5118, or under subdivision (3) of Section 2711
or subdivision (5) of Section 10508.
   (73) "Security agreement" means an agreement that creates or
provides for a security interest.
   (74) "Send," in connection with a record or notification, means to
do either of the following:
   (A) To deposit in the mail, deliver for transmission, or transmit
by any other usual means of communication, with postage or cost of
transmission provided for, addressed to any address reasonable under
the circumstances.
   (B) To cause the record or notification to be received within the
time that it would have been received if properly sent under
subparagraph (A).
   (75) "Software" means a computer program and any supporting
information provided in connection with a transaction relating to the
program.  The term does not include a computer program that is
included in the definition of goods.
   (76) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
   (77) "Supporting obligation" means a letter-of-credit right or
secondary obligation that supports the payment or performance of an
account, chattel paper, document, general intangible, instrument, or
investment property.
   (78) "Tangible chattel paper" means chattel paper evidenced by a
record or records consisting of information that is inscribed on a
tangible medium.
   (79) "Termination statement" means an amendment of a financing
statement that does both of the following:
   (A) Identifies, by its file number, the initial financing
statement to which it relates.
   (B) Indicates either that it is a termination statement or that
the identified financing statement is no longer effective.
   (80) "Transmitting utility" means a person primarily engaged in
the business of any of the following:
   (A) Operating a railroad, subway, street railway, or trolley bus.

   (B) Transmitting communications electrically, electromagnetically,
or by light.
   (C) Transmitting goods by pipeline or sewer.
   (D) Transmitting or producing and transmitting electricity, steam,
gas, or water.
   (b) The following definitions in other divisions apply to this
division:


  "Applicant"                                         Section 5102.
  "Beneficiary"                                       Section 5102.
  "Broker"                                            Section 8102.
  "Certificated security"                             Section 8102.
  "Check"                                             Section 3104.
  "Clearing corporation"                              Section 8102.
  "Contract for sale"                                 Section 2106.
  "Customer"                                          Section 4104.
  "Entitlement holder"                                Section 8102.
  "Financial asset"                                   Section 8102.
  "Holder in due course"                              Section 3302.
  "Issuer" (with respect to a letter of credit or
   letter-of-credit right)                            Section 5102.
  "Issuer" (with respect to a security)               Section 8201.
  "Lease"                                             Section 10103.

  "Lease agreement"                                   Section 10103.

  "Lease contract"                                    Section 10103.

  "Leasehold interest"                                Section 10103.

  "Lessee"                                            Section 10103.

  "Lessee in ordinary course of business"             Section 10103.

  "Lessor"                                            Section 10103.

  "Lessor's residual interest"                        Section 10103.

  "Letter of credit"                                  Section 5102.
  "Merchant"                                          Section 2104.
  "Negotiable instrument"                             Section 3104.
  "Nominated person"                                  Section 5102.
  "Note"                                              Section 3104.
  "Proceeds of a letter of credit"                    Section 5114.
  "Prove"                                             Section 3103.
  "Sale"                                              Section 2106.
  "Securities account"                                Section 8501.
  "Securities intermediary"                           Section 8102.
  "Security"                                          Section 8102.
  "Security certificate"                              Section 8102.
  "Security entitlement"                              Section 8102.
  "Uncertificated security"                           Section 8102.

   (c) Division 1 (commencing with Section 1101) contains general
definitions and principles of construction and interpretation
applicable throughout this division.
  SEC. 7.  Section 9104 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9104.  (a) A secured party has control of a deposit account if any
of the following conditions is satisfied:
   (1) The secured party is the bank with which the deposit account
is maintained.
   (2) The debtor, secured party, and bank have agreed in an
authenticated record that the bank will comply with instructions
originated by the secured party directing disposition of the funds in
the deposit account without further consent by the debtor.
   (3) The secured party becomes the bank's customer with respect to
the deposit account.
   (b) A secured party that has satisfied subdivision (a) has
control, even if the debtor retains the right to direct the
disposition of funds from the deposit account.
  SEC. 8.  Section 9205 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9205.  (a) A security interest is not invalid or fraudulent
against creditors solely because either of the following applies:
   (1) The debtor has the right or ability to do any of the
following:
   (A) Use, commingle, or dispose of all or part of the collateral,
including returned or repossessed goods.
   (B) Collect, compromise, enforce, or otherwise deal with
collateral.
   (C) Accept the return of collateral or make repossessions.
   (D) Use, commingle, or dispose of proceeds.
   (2) The secured party fails to require the debtor to account for
proceeds or replace collateral.
   (b) This section does not relax the requirements of possession if
attachment, perfection, or enforcement of a security interest depends
upon possession of the collateral by the secured party.
  SEC. 9.  Section 9210 of the Commercial Code is amended to read:
   9210.  (a) In this section:
   (1) "Request" means a record of a type described in paragraph (2),
(3), or (4).
   (2) "Request for an accounting" means a record authenticated by a
debtor requesting that the recipient provide an accounting of the
unpaid obligations secured by collateral and reasonably identifying
the transaction or relationship that is the subject of the request.
   (3) "Request regarding a list of collateral" means a record
authenticated by a debtor requesting that the recipient approve or
correct a list of what the debtor believes to be the collateral
securing an obligation and reasonably identifying the transaction or
relationship that is the subject of the request.
   (4) "Request regarding a statement of account" means a record
authenticated by a debtor requesting that the recipient approve or
correct a statement indicating what the debtor believes to be the
aggregate amount of unpaid obligations secured by collateral as of a
specified date and reasonably identifying the transaction or
relationship that is the subject of the request.
   (b) Subject to subdivisions (c), (d), (e), and (f), a secured
party, other than a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor, shall comply with a
request within 14 days after receipt as follows:
   (1) In the case of a request for an accounting, by authenticating
and sending to the debtor an accounting.
   (2) In the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating and
sending to the debtor an approval or correction.
   (c) A secured party that claims a security interest in all of a
particular type of collateral owned by the debtor may comply with a
request regarding a list of collateral by sending to the debtor an
authenticated record including a statement to that effect within 14
days after receipt.
   (d) A person that receives a request regarding a list of
collateral, claims no interest in the collateral when it receives the
request, and claimed an interest in the collateral at an earlier
time shall comply with the request within 14 days after receipt by
sending to the debtor an authenticated record that contains both of
the following:
   (1) It disclaims any interest in the collateral.
   (2) If known to the recipient, it provides the name and mailing
address of any assignee of or successor to the recipient's interest
in the collateral.
   (e) A person that receives a request for an accounting or a
request regarding a statement of account, claims no interest in the
obligations when it receives the request, and claimed an interest in
the obligations at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an
authenticated record that contains both of the following:
   (1) It disclaims any interest in the obligations.
   (2) If known to the recipient, it provides the name and mailing
address of any assignee of or successor to the recipient's interest
in the obligations.
   (f) A debtor is entitled without charge to one response to a
request under this section during any six-month period.  The secured
party may require payment of a charge not exceeding twenty-five
dollars ($25) for each additional response.
  SEC. 10.  Section 9307 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9307.  (a) In this section, "place of business" means a place
where a debtor conducts its affairs.
   (b) Except as otherwise provided in this section, the following
rules determine a debtor's location:
   (1) A debtor who is an individual is located at the individual's
principal residence.
   (2) A debtor that is an organization and has only one place of
business is located at its place of business.
   (3) A debtor that is an organization and has more than one place
of business is located at its chief executive office.
   (c) Subdivision (b) applies only if a debtor's residence, place of
business, or chief executive office, as applicable, is located in a
jurisdiction whose law generally requires information concerning the
existence of a nonpossessory security interest to be made generally
available in a filing, recording, or registration system as a
condition or result of the security interest's obtaining priority
over the rights of a lien creditor with respect to the collateral.
If subdivision (b) does not apply, the debtor is located in the
District of Columbia.
   (d) A person that ceases to exist, have a residence, or have a
place of business continues to be located in the jurisdiction
specified by subdivisions (b) and (c).
   (e) A registered organization that is organized under the law of a
state is located in that state.
   (f) Except as otherwise provided in subdivision (i), a registered
organization that is organized under the law of the United States and
a branch or agency of a bank that is not organized under the law of
the United States or a state are located in any of the following
jurisdictions:
   (1) In the state that the law of the United States designates, if
the law designates a state of location.
   (2) In the state that the registered organization, branch, or
agency designates, if the law of the United States authorizes the
registered organization, branch, or agency to designate its state of
location.
   (3) In the District of Columbia, if neither paragraph (1) nor
paragraph (2) applies.
   (g) A registered organization continues to be located in the
jurisdiction specified by subdivision (e) or (f) notwithstanding
either of the following:
   (1) The suspension, revocation, forfeiture, or lapse of the
registered organization's status as such in its jurisdiction of
organization.
   (2) The dissolution, winding up, or cancellation of the existence
of the registered organization.
   (h) The United States is located in the District of Columbia.
   (i) A branch or agency of a bank that is not organized under the
law of the United States or a state is located in the state in which
the branch or agency is licensed, if all branches and agencies of the
bank are licensed in only one state.
   (j) A foreign air carrier under the Federal Aviation Act of 1958,
as amended, is located at the designated office of the agent upon
which service of process may be made on behalf of the carrier.
   (k) This section applies only for purposes of this chapter.
  SEC. 11.  Section 9311 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9311.  (a) Except as otherwise provided in subdivision (d), the
filing of a financing statement is not necessary or effective to
perfect a security interest in property subject to any of the
following:
   (1) A statute, regulation, or treaty of the United States whose
requirements for a security interest's obtaining priority over the
rights of a lien creditor with respect to the property preempt
subdivision (a) of Section 9310.
   (2) (A) The provisions of the Vehicle Code which require
registration of a vehicle or boat.
   (B) The provisions of the Health and Safety Code which require
registration of a mobilehome or commercial coach, except that during
any period in which collateral is inventory, the filing provisions of
Chapter 5 (commencing with Section 9501) apply to a security
interest in that collateral.
   (C) The provisions of the Health and Safety Code which require
registration of all interests in approved air contaminant emission
reductions (Sections 40709 to 40713, inclusive, of the Health and
Safety Code).
   (3) A certificate of title statute of another jurisdiction which
provides for a security interest to be indicated on the certificate
as a condition or result of the security interest's obtaining
priority over the rights of a lien creditor with respect to the
property.
   (b) Compliance with the requirements of a statute, regulation, or
treaty described in subdivision (a) for obtaining priority over the
rights of a lien creditor is equivalent to the filing of a financing
statement under this division.  Except as otherwise provided in
subdivision (d), in Section 9313, and in subdivisions (d) and (e) of
Section 9316 for goods covered by a certificate of title, a security
interest in property subject to a statute, regulation, or treaty
described in subdivision (a) may be perfected only by compliance with
those requirements, and a security interest so perfected remains
perfected notwithstanding a change in the use or transfer of
possession of the collateral.
   (c) Except as otherwise provided in subdivision (d) and in
subdivisions (d) and (e) of Section 9316, duration and renewal of
perfection of a security interest perfected by compliance with the
requirements prescribed by a statute, regulation, or treaty described
in subdivision (a) are governed by the statute, regulation, or
treaty.  In other respects, the security interest is subject to this
division.
   (d) During any period in which collateral subject to a statute
specified in paragraph (2) of subdivision (a) is inventory held for
sale or lease by a person or leased by that person as lessor and that
person is in the business of selling goods of that kind, this
section does not apply to a security interest in that collateral
created by that person.
  SEC. 12.  Section 9317 of the Commercial Code is amended to read:
   9317.  (a) A security interest or agricultural lien is subordinate
to the rights of both of the following:
   (1) A person entitled to priority under Section 9322.
   (2) Except as otherwise provided in subdivision (e), a person that
becomes a lien creditor before the earlier of the time the security
interest or agricultural lien is perfected, or one of the conditions
specified in paragraph (3) of subdivision (b) of Section 9203 is met
and a financing statement covering the collateral is filed.
   (b) Except as otherwise provided in subdivision (e), a buyer,
other than a secured party, of tangible chattel paper, documents,
goods, instruments, or a security certificate takes free of a
security interest or agricultural lien if the buyer gives value and
receives delivery of the collateral without knowledge of the security
interest or agricultural lien and before it is perfected.
   (c) Except as otherwise provided in subdivision (e), a lessee of
goods takes free of a security interest or agricultural lien if the
lessee gives value and receives delivery of the collateral without
knowledge of the security interest or agricultural lien and before it
is perfected.
   (d) A licensee of a general intangible or a buyer, other than a
secured party, of accounts, electronic chattel paper, general
intangibles, or investment property other than a certificated
security takes free of a security interest if the licensee or buyer
gives value without knowledge of the security interest and before it
is perfected.
   (e) Except as otherwise provided in Sections 9320 and 9321, if a
person files a financing statement with respect to a purchase money
security interest before or within 20 days after the debtor receives
delivery of the collateral, the security interest takes priority over
the rights of a buyer, lessee, or lien creditor which arise between
the time the security interest attaches and the time of filing.
  SEC. 13.  Section 9319 of the Commercial Code is amended to read:
   9319.  (a) Except as otherwise provided in subdivision (b), for
purposes of determining the rights of creditors of, and purchasers
for value of goods from, a consignee, while the goods are in the
possession of the consignee, the consignee is deemed to have rights
and title to the goods identical to those the consignor had or had
power to transfer.
   (b) For purposes of determining the rights of a creditor of a
consignee, law other than this division determines the rights and
title of a consignee while goods are in the consignee's possession
if, under this chapter, a perfected security interest held by the
consignor would have priority over the rights of the creditor.
  SEC. 14.  Section 9323 of the Commercial Code is amended to read:
   9323.  (a) Except as otherwise provided in subdivision (c), for
purposes of determining the priority of a perfected security interest
under paragraph (1) of subdivision (a) of Section 9322, perfection
of the security interest dates from the time an advance is made to
the extent that the security interest secures an advance that
satisfies both of the following conditions:
   (1) It is made while the security interest is perfected only under
either of the following:
   (A) Under Section 9309 when it attaches.
   (B) Temporarily under subdivision (e), (f), or (g) of Section
9312.
   (2) It is not made pursuant to a commitment entered into before or
while the security interest is perfected by a method other than
under Section 9309 or under subdivision (e), (f), or (g) of Section
9312.
   (b) Except as otherwise provided in subdivision (c), a security
interest is subordinate to the rights of a person that becomes a lien
creditor to the extent that the security interest secures an advance
made more than 45 days after the person becomes a lien creditor
unless either of the following conditions is satisfied:
   (1) The advance is made without knowledge of the lien.
   (2) The advance is made pursuant to a commitment entered into
without knowledge of the lien.
   (c) Subdivisions (a) and (b) do not apply to a security interest
held by a secured party that is a buyer of accounts, chattel paper,
payment intangibles, or promissory notes or a consignor.
   (d) Except as otherwise provided in subdivision (e), a buyer of
goods other than a buyer in ordinary course of business takes free of
a security interest to the extent that it secures advances made
after the earlier of the following:
   (1) The time the secured party acquires knowledge of the buyer's
purchase.
                                                    (2) Forty-five
days after the purchase.
   (e) Subdivision (d) does not apply if the advance is made pursuant
to a commitment entered into without knowledge of the buyer's
purchase and before the expiration of the 45-day period.
   (f) Except as otherwise provided in subdivision (g), a lessee of
goods, other than a lessee in ordinary course of business, takes the
leasehold interest free of a security interest to the extent that it
secures advances made after the earlier of either of the following:
   (1) The time the secured party acquires knowledge of the lease.
   (2) Forty-five days after the lease contract becomes enforceable.

   (g) Subdivision (f) does not apply if the advance is made pursuant
to a commitment entered into without knowledge of the lease and
before the expiration of the 45-day period.
  SEC. 15.  Section 9325 of the Commercial Code is amended to read:
   9325.  (a) Except as otherwise provided in subdivision (b), a
security interest created by a debtor is subordinate to a security
interest in the same collateral created by another person if all of
the following apply:
   (1) The debtor acquired the collateral subject to the security
interest created by the other person.
   (2) The security interest created by the other person was
perfected when the debtor acquired the collateral.
   (3) There is no period thereafter when the security interest is
unperfected.
   (b) Subdivision (a) subordinates a security interest only if
either of the following conditions is satisfied:
   (1) The security interest otherwise would have priority solely
under subdivision (a) of Section 9322 or under Section 9324.
   (2) The security interest arose solely under subdivision (3) of
Section 2711 or subdivision (5) of Section 10508.
  SEC. 16.  Section 9331 of the Commercial Code is amended to read:
   9331.  (a) This division does not limit the rights of a holder in
due course of a negotiable instrument, a holder to which a negotiable
document of title has been duly negotiated, or a protected purchaser
of a security.  These holders or purchasers take priority over an
earlier security interest, even if perfected, to the extent provided
in Division 3 (commencing with Section 3101), Division 7 (commencing
with Section 7101), and Division 8 (commencing with Section 8101).
   (b) This division does not limit the rights of or impose liability
on a person to the extent that the person is protected against the
assertion of a claim under Division 8 (commencing with Section 8101).

   (c) Filing under this division does not constitute notice of a
claim or defense to the holders, or purchasers, or persons described
in subdivisions (a) and (b).
  SEC. 17.  Section 9336 of the Commercial Code is amended to read:
   9336.  (a) In this section, "commingled goods" means goods that
are physically united with other goods in such a manner that their
identity is lost in a product or mass.
   (b) A security interest does not exist in commingled goods as
such.  However, a security interest may attach to a product or mass
that results when goods become commingled goods.
   (c) If collateral becomes commingled goods, a security interest
attaches to the product or mass.
   (d) If a security interest in collateral is perfected before the
collateral becomes commingled goods, the security interest that
attaches to the product or mass under subdivision (c) is perfected.
   (e) Except as otherwise provided in subdivision (f), the other
provisions of this chapter determine the priority of a security
interest that attaches to the product or mass under subdivision (c).

   (f) If more than one security interest attaches to the product or
mass under subdivision (c), the following rules determine priority:
   (1) A security interest that is perfected under subdivision (d)
has priority over a security interest that is unperfected at the time
the collateral becomes commingled goods.
   (2) If more than one security interest is perfected under
subdivision (d), the security interests rank equally in proportion to
the value of the collateral at the time it became commingled goods.

  SEC. 18.  Section 9403 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is repealed.
  SEC. 19.  Section 9403 of the Commercial Code, as amended by
Section 14 of Chapter 1000 of the Statutes of 1999, is repealed.
  SEC. 20.  Section 9403 is added to the Commercial Code, to read:
   9403.  (a) In this section, "value" has the meaning provided in
subdivision (a) of Section 3303.
   (b) Except as otherwise provided in this section, an agreement
between an account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may have
against the assignor is enforceable by an assignee that takes an
assignment that satisfies all of the following conditions:
   (1) It is taken for value.
   (2) It is taken in good faith.
   (3) It is taken without notice of a claim of a property or
possessory right to the property assigned.
   (4) It is taken without notice of a defense or claim in recoupment
of the type that may be asserted against a person entitled to
enforce a negotiable instrument under subdivision (a) of Section
3305.
   (c) Subdivision (b) does not apply to defenses of a type that may
be asserted against a holder in due course of a negotiable instrument
under subdivision (b) of Section 3305.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the rights of an
assignee are subject to claims or defenses that the account debtor
could assert against the original obligee, and the record does not
include such a statement, then both of the following apply:
   (1) The record has the same effect as if the record included such
a statement.
   (2) The account debtor may assert against an assignee those claims
and defenses that would have been available if the record included
such a statement.
   (e) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
   (f) Except as otherwise provided in subdivision (d), this section
does not displace law other than this division which gives effect to
an agreement by an account debtor not to assert a claim or defense
against an assignee.
  SEC. 21.  Section 9404 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is repealed.
  SEC. 22.  Section 9404 of the Commercial Code, as amended by
Section 15 of Chapter 1000 of the Statutes of 1999, is repealed.
  SEC. 23.  Section 9404 is added to the Commercial Code, to read:
   9404.  (a) Unless an account debtor has made an enforceable
agreement not to assert defenses or claims, and subject to
subdivisions (b) to (e), inclusive, the rights of an assignee are
subject to both of the following:
   (1) All terms of the agreement between the account debtor and
assignor and any defense or claim in recoupment arising from the
transaction that gave rise to the contract.
   (2) Any other defense or claim of the account debtor against the
assignor which accrues before the account debtor receives a
notification of the assignment authenticated by the assignor or the
assignee.
   (b) Subject to subdivision (c) and except as otherwise provided in
subdivision (d), the claim of an account debtor against an assignor
may be asserted against an assignee under subdivision (a) only to
reduce the amount the account debtor owes.
   (c) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the account debtor's
recovery against an assignee with respect to claims and defenses
against the assignor may not exceed amounts paid by the account
debtor under the record, and the record does not include such a
statement, the extent to which a claim of an account debtor against
the assignor may be asserted against an assignee is determined as if
the record included such a statement.
   (e) This section does not apply to an assignment of a health care
insurance receivable.
  SEC. 24.  Section 9405 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is repealed.
  SEC. 25.  Section 9405 of the Commercial Code, as amended by
Section 16 of Chapter 1000 of the Statutes of 1999, is repealed.
  SEC. 26.  Section 9405 is added to the Commercial Code, to read:
   9405.  (a) A modification of or substitution for an assigned
contract is effective against an assignee if made in good faith.  The
assignee acquires corresponding rights under the modified or
substituted contract.  The assignment may provide that the
modification or substitution is a breach of contract by the assignor.
  This subdivision is subject to subdivisions (b) to (d), inclusive.

   (b) Subdivision (a) applies to the extent that either of the
following apply:
   (1) The right to payment or a part thereof under an assigned
contract has not been fully earned by performance.
   (2) The right to payment or a part thereof has been fully earned
by performance and the account debtor has not received notification
of the assignment under subdivision (a) of Section 9406.
   (c) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
   (d) This section does not apply to an assignment of a health care
insurance receivable.
  SEC. 27.  Section 9406 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is repealed.
  SEC. 28.  Section 9406 of the Commercial Code, as amended by
Section 17 of Chapter 1000 of the Statutes of 1999, is repealed.
  SEC. 29.  Section 9406 is added to the Commercial Code, to read:
   9406.  (a) Subject to subdivisions (b) to (i), inclusive, an
account debtor on an account, chattel paper, or a payment intangible
may discharge its obligation by paying the assignor until, but not
after, the account debtor receives a notification, authenticated by
the assignor or the assignee, that the amount due or to become due
has been assigned and that payment is to be made to the assignee.
After receipt of the notification, the account debtor may discharge
its obligation by paying the assignee and may not discharge the
obligation by paying the assignor.
   (b) Subject to subdivision (h), notification is ineffective under
subdivision (a) as follows:
   (1) If it does not reasonably identify the rights assigned.
   (2) To the extent that an agreement between an account debtor and
a seller of a payment intangible limits the account debtor's duty to
pay a person other than the seller and the limitation is effective
under law other than this division.
   (3) At the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount of any
installment or other periodic payment to the assignee, even if any of
the following conditions is satisfied:
   (A) Only a portion of the account, chattel paper, or payment
intangible has been assigned to that assignee.
   (B) A portion has been assigned to another assignee.
   (C) The account debtor knows that the assignment to that assignee
is limited.
   (c) Subject to subdivision (h), if requested by the account
debtor, an assignee shall seasonably furnish reasonable proof that
the assignment has been made.  Unless the assignee complies, the
account debtor may discharge its obligation by paying the assignor,
even if the account debtor has received a notification under
subdivision (a).
   (d) Except as otherwise provided in subdivision (e) and in
Sections 9407 and 10303, and subject to subdivision (h), a term in an
agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it does either of
the following:
   (1) Prohibits, restricts, or requires the consent of the account
debtor or person obligated on the promissory note to the assignment
or transfer of, or the creation, attachment, perfection, or
enforcement of a security interest in, the account, chattel paper,
payment intangible, or promissory note.
   (2) Provides that the assignment or transfer or the creation,
attachment, perfection, or enforcement of the security interest may
give rise to a default, breach, right of recoupment, claim, defense,
termination, right of termination, or remedy under the account,
chattel paper, payment intangible, or promissory note.
   (e) Subdivision (d) does not apply to the sale of a payment
intangible or promissory note.
   (f) Except as otherwise provided in Sections 9407 and 10303, and
subject to subdivisions (h) and (i), a rule of law, statute, or
regulation, that prohibits, restricts, or requires the consent of a
government, governmental body or official, or account debtor to the
assignment or transfer of, or creation of a security interest in, an
account or chattel paper is ineffective to the extent that the rule
of law, statute, or regulation does either of the following:
   (1) Prohibits, restricts, or requires the consent of the
government, governmental body or official, or account debtor to the
assignment or transfer of, or the creation, attachment, perfection,
or enforcement of a security interest in, the account or chattel
paper.
   (2) Provides that the assignment or transfer or the creation,
attachment, perfection, or enforcement of the security interest may
give rise to a default, breach, right of recoupment, claim, defense,
termination, right of termination, or remedy under the account or
chattel paper.
   (g) Subject to subdivision (h), an account debtor may not waive or
vary its option under paragraph (3) of subdivision (b).
   (h) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
   (i) This section does not apply to an assignment of a health care
insurance receivable.
   (j) Subdivision (f) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (f) is inconsistent with those laws.
  SEC. 30.  Section 9407 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9407.  (a) Except as otherwise provided in subdivision (b), a term
in a lease agreement is ineffective to the extent that it does
either of the following:
   (1) Prohibits, restricts, or requires the consent of a party to
the lease to the assignment or transfer of, or the creation,
attachment, perfection, or enforcement of a security interest in, an
interest of a party under the lease contract or in the lessor's
residual interest in the goods.
   (2) Provides that the assignment or transfer or the creation,
attachment, perfection, or enforcement of the security interest may
give rise to a default, breach, right of recoupment, claim, defense,
termination, right of termination, or remedy under the lease.
   (b) Except as otherwise provided in subdivision (g) of Section
10303, a term described in paragraph (2) of subdivision (a) is
effective to the extent that there is either of the following:
   (1) A transfer by the lessee of the lessee's right of possession
or use of the goods in violation of the term.
   (2) A delegation of a material performance of either party to the
lease contract in violation of the term.
   (c) The creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease contract
or the lessor's residual interest in the goods is not a transfer that
materially impairs the lessee's prospect of obtaining return
performance or materially changes the duty of or materially increases
the burden or risk imposed on the lessee within the purview of
subdivision (d) of Section 10303 unless, and then only to the extent
that, enforcement actually results in a delegation of material
performance of the lessor.
  SEC. 31.  Section 9408 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9408.  (a) Except as otherwise provided in subdivision (b), a term
in a promissory note or in an agreement between an account debtor
and a debtor which relates to a health care insurance receivable or a
general intangible, including a contract, permit, license, or
franchise, and which term prohibits, restricts, or requires the
consent of the person obligated on the promissory note or the account
debtor to, the assignment or transfer of, or the creation,
attachment, or perfection of a security interest in, the promissory
note, health care insurance receivable, or general intangible, is
ineffective to the extent that the term does, or would do, either of
the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the creation,
attachment, or perfection of the security interest may give rise to a
default, breach, right of recoupment, claim, defense, termination,
right of termination, or remedy under the promissory note, health
care insurance receivable, or general intangible.
   (b) Subdivision (a) applies to a security interest in a payment
intangible or promissory note only if the security interest arises
out of a sale of the payment intangible or promissory note.
   (c) A rule of law, statute, or regulation, that prohibits,
restricts, or requires the consent of a government, governmental body
or official, person obligated on a promissory note, or account
debtor to the assignment or transfer of, or the creation of a
security interest in, a promissory note, health care insurance
receivable, or general intangible, including a contract, permit,
license, or franchise between an account debtor and a debtor, is
ineffective to the extent that the rule of law, statute, or
regulation does, or would do, either of the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the creation,
attachment, or perfection of the security interest may give rise to a
default, breach, right of recoupment, claim, defense, termination,
right of termination, or remedy under the promissory note, health
care insurance receivable, or general intangible.
   (d) To the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor which relates to a
health care insurance receivable or general intangible or a rule of
law, statute, or regulation described in subdivision (c) would be
effective under law other than this division but is ineffective under
subdivision (a) or (c), all of the following rules apply with
respect to the creation, attachment, or perfection of a security
interest in the promissory note, health care insurance receivable, or
general intangible:
   (1) It is not enforceable against the person obligated on the
promissory note or the account debtor.
   (2) It does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor.
   (3) It does not require the person obligated on the promissory
note or the account debtor to recognize the security interest, pay or
render performance to the secured party, or accept payment or
performance from the secured party.
   (4) It does not entitle the secured party to use or assign the
debtor's rights under the promissory note, health care insurance
receivable, or general intangible, including any related information
or materials furnished to the debtor in the transaction giving rise
to the promissory note, health care insurance receivable, or general
intangible.
   (5) It does not entitle the secured party to use, assign, possess,
or have access to any trade secrets or confidential information of
the person obligated on the promissory note or the account debtor.
   (6) It does not entitle the secured party to enforce the security
interest in the promissory note, health care insurance receivable, or
general intangible.
   (e) Subdivision (c) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (c) is inconsistent with those laws.
  SEC. 32.  Section 9409 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is repealed.
  SEC. 33.  Section 9409 of the Commercial Code, as amended by
Section 18 of Chapter 1000 of the Statutes of 1999, is repealed.
  SEC. 34.  Section 9409 is added to the Commercial Code, to read:
   9409.  (a) A term in a letter of credit or a rule of law, statute,
regulation, custom, or practice applicable to the letter of credit
which prohibits, restricts, or requires the consent of an applicant,
issuer, or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is
ineffective to the extent that the term or rule of law, statute,
regulation, custom, or practice does, or would do, either of the
following:
   (1) It would impair the creation, attachment, or perfection of a
security interest in the letter-of-credit right.
   (2) It provides that the assignment or the creation, attachment,
or perfection of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of
termination, or remedy under the letter-of-credit right.
   (b) To the extent that a term in a letter of credit is ineffective
under subdivision (a) but would be effective under law other than
this division or a custom or practice applicable to the letter of
credit, to the transfer of a right to draw or otherwise demand
performance under the letter of credit, or to the assignment of a
right to proceeds of the letter of credit, all of the following rules
apply with respect to the creation, attachment, or perfection of a
security interest in the letter-of-credit right:
   (1) It is not enforceable against the applicant, issuer, nominated
person, or transferee beneficiary.
   (2) It imposes no duties or obligations on the applicant, issuer,
nominated person, or transferee beneficiary.
   (3) It does not require the applicant, issuer, nominated person,
or transferee beneficiary to recognize the security interest, pay or
render performance to the secured party, or accept payment or other
performance from the secured party.
  SEC. 35.  Section 9502 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9502.  (a) Subject to subdivision (b), a financing statement is
sufficient only if it satisfies all of the following conditions:
   (1) It provides the name of the debtor.
   (2) It provides the name of the secured party or a representative
of the secured party.
   (3) It indicates the collateral covered by the financing
statement.
   (b) Except as otherwise provided in subdivision (b) of Section
9501, to be sufficient, a financing statement that covers
as-extracted collateral or timber to be cut, or which is filed as a
fixture filing and covers goods that are or are to become fixtures,
must satisfy subdivision (a) and also satisfy all of the following
conditions:
   (1) Indicate that it covers this type of collateral.
   (2) Indicate that it is to be recorded in the real property
records.
   (3) Provide a description of the real property to which the
collateral is related sufficient to give constructive notice of a
mortgage under the law of this state if the description were
contained in a record of the mortgage of the real property.
   (4) If the debtor does not have an interest of record in the real
property, provide the name of a record owner.
   (c) A record of a mortgage is effective, from the date of
recording, as a financing statement filed as a fixture filing or as a
financing statement covering as-extracted collateral or timber to be
cut only if all of the following conditions are satisfied:
   (1) The record indicates the goods or accounts that it covers.
   (2) The goods are or are to become fixtures related to the real
property described in the record or the collateral is related to the
real property described in the record and is as-extracted collateral
or timber to be cut.
   (3) The record satisfies the requirements for a financing
statement in this section other than an indication that it is to be
filed in the real property records.
   (4) The record is duly recorded.
   (d) A financing statement may be filed before a security agreement
is made or a security interest otherwise attaches.
  SEC. 36.  Section 9505 of the Commercial Code, as added by Section
35 of Chapter 991 of the Statutes of 1999, is amended to read:
   9505.  (a) A consignor, lessor, or other bailor of goods, a
licensor, or a buyer of a payment intangible or promissory note may
file a financing statement, or may comply with a statute or treaty
described in subdivision (a) of Section 9311, using the terms
"consignor," "consignee," "lessor," "lessee," "bailor," "bailee,"
"licensor," "licensee," "owner," "registered owner," "buyer,"
"seller," or words of similar import, instead of the terms "secured
party" and "debtor."
                                                                 (b)
This chapter applies to the filing of a financing statement under
subdivision (a) and, as appropriate, to compliance that is equivalent
to filing a financing statement under subdivision (b) of Section
9311, but the filing or compliance is not of itself a factor in
determining whether the collateral secures an obligation.  If it is
determined for another reason that the collateral secures an
obligation, a security interest held by the consignor, lessor,
bailor, licensor, owner, or buyer which attaches to the collateral is
perfected by the filing or compliance.
  SEC. 37.  Section 9509 of the Commercial Code is amended to read:
   9509.  (a) A person may file an initial financing statement, an
amendment that adds collateral covered by a financing statement, or
an amendment that adds a debtor to a financing statement only if
either of the following conditions is satisfied:
   (1) The debtor authorizes the filing in an authenticated record or
pursuant to subdivision (b) or (c).
   (2) The person holds an agricultural lien that has become
effective at the time of filing and the financing statement covers
only collateral in which the person holds an agricultural lien.
   (b) By authenticating or becoming bound as debtor by a security
agreement, a debtor or new debtor authorizes the filing of an initial
financing statement, and an amendment, covering both of the
following:
   (1) The collateral described in the security agreement.
   (2) Property that becomes collateral under paragraph (2) of
subdivision (a) of Section 9315, whether or not the security
agreement expressly covers proceeds.
   (c) By acquiring collateral in which a security interest or
agricultural lien continues under paragraph (1) of subdivision (a) of
Section 9315, a debtor authorizes the filing of an initial financing
statement, and an amendment, covering the collateral and property
that becomes collateral under paragraph (2) of subdivision (a) of
Section 9315.
   (d) A person may file an amendment other than an amendment that
adds collateral covered by a financing statement or an amendment that
adds a debtor to a financing statement only if either of the
following conditions is satisfied:
   (1) The secured party of record authorizes the filing.
   (2) The amendment is a termination statement for a financing
statement as to which the secured party of record has failed to file
or send a termination statement as required by subdivision (a) or (c)
of Section 9513, the debtor authorizes the filing, and the
termination statement indicates that the debtor authorized it to be
filed.
   (e) If there is more than one secured party of record for a
financing statement, each secured party of record may authorize the
filing of an amendment under subdivision (d).
  SEC. 38.  Section 9513 of the Commercial Code is amended to read:
   9513.  (a) A secured party shall cause the secured party of record
for a financing statement to file a termination statement for the
financing statement if the financing statement covers consumer goods
and either of the following conditions is satisfied:
   (1) There is no obligation secured by the collateral covered by
the financing statement and no commitment to make an advance, incur
an obligation, or otherwise give value.
   (2) The debtor did not authorize the filing of the initial
financing statement.
   (b) To comply with subdivision (a), a secured party shall cause
the secured party of record to file the termination statement in
accordance with either of the following rules:
   (1) Within one month after there is no obligation secured by the
collateral covered by the financing statement and no commitment to
make an advance, incur an obligation, or otherwise give value.
   (2) If earlier, within 20 days after the secured party receives an
authenticated demand from a debtor.
   (c) In cases not governed by subdivision (a), within 20 days after
a secured party receives an authenticated demand from a debtor, the
secured party shall cause the secured party of record for a financing
statement to send to the debtor a termination statement for the
financing statement or file the termination statement in the filing
office if any of the following conditions is satisfied:
   (1) Except in the case of a financing statement covering accounts
or chattel paper that has been sold or goods that are the subject of
a consignment, there is no obligation secured by the collateral
covered by the financing statement and no commitment to make an
advance, incur an obligation, or otherwise give value.
   (2) The financing statement covers accounts or chattel paper that
has been sold but as to which the account debtor or other person
obligated has discharged its obligation.
   (3) The financing statement covers goods that were the subject of
a consignment to the debtor but are not in the debtor's possession.
   (4) The debtor did not authorize the filing of the initial
financing statement.
   (d) Except as otherwise provided in Section 9510, upon the filing
of a termination statement with the filing office, the financing
statement to which the termination statement relates ceases to be
effective.  Except as otherwise provided in Section 9510, for
purposes of subdivision (g) of Section 9519, subdivision (a) of
Section 9522, and subdivision (c) of Section 9523, the filing with
the filing office of a termination statement relating to a financing
statement that indicates that the debtor is a transmitting utility
also causes the effectiveness of the financing statement to lapse.
  SEC. 39.  Section 9519 of the Commercial Code is amended to read:
   9519.  (a) For each record filed in a filing office, the filing
office shall do all of the following:
   (1) Assign a unique number to the filed record.
   (2) Create a record that bears the number assigned to the filed
record and the date and time of filing.
   (3) Maintain the filed record for public inspection.
   (4) Index the filed record in accordance with subdivisions (c),
(d), and (e).
   (b) Except as otherwise provided in subdivision (i), a file number
assigned after January 1, 2002, must include a digit that:
   (1) Is mathematically derived from or related to the other digits
of the file number.
   (2) Aids the filing office in determining whether a number
communicated as the file number includes a single-digit or
transpositional error.
   (c) Except as otherwise provided in subdivisions (d) and (e), the
filing office shall do both of the following:
   (1) Index an initial financing statement according to the name of
the debtor and index all filed records relating to the initial
financing statement in a manner that associates with one another an
initial financing statement and all filed records relating to the
initial financing statement.
   (2) Index a record that provides a name of a debtor which was not
previously provided in the financing statement to which the record
relates also according to the name that was not previously provided.

   (d) If a financing statement is filed as a fixture filing or
covers as-extracted collateral or timber to be cut, it must be
recorded and the filing office shall index it in accordance with both
of the following rules:
   (1) Under the names of the debtor and of each owner of record
shown on the financing statement as if they were the mortgagors under
a mortgage of the real property described.
   (2) To the extent that the law of this state provides for indexing
of records of mortgages under the name of the mortgagee, under the
name of the secured party as if the secured party were the mortgagee
thereunder, or, if indexing is by description, as if the financing
statement were a record of a mortgage of the real property described.

   (e) If a financing statement is filed as a fixture filing or
covers as-extracted collateral or timber to be cut, the filing office
shall index an assignment filed under subdivision (a) of Section
9514 or an amendment filed under subdivision (b) of Section 9514 in
accordance with both of the following rules:
   (1) Under the name of the assignor as grantor.
   (2) To the extent that the law of this state provides for indexing
a record of the assignment of a mortgage under the name of the
assignee, under the name of the assignee.
   (f) The filing office shall maintain a capability to do both of
the following:
   (1) Retrieve a record by the name of the debtor and by either of
the following:
   (A) If the filing office is described in paragraph (1) of
subdivision (a) of Section 9501, by the file number assigned to the
initial financing statement to which the record relates and the date
that the record was filed or recorded.
   (B) If the filing office is described in paragraph (2) of
subdivision (a) of Section 9501, by the file number assigned to the
initial financing statement to which the record relates.
   (2) Associate and retrieve with one another an initial financing
statement and each filed record relating to the initial financing
statement.
   (g) The filing office may not remove a debtor's name from the
index until one year after the effectiveness of a financing statement
naming the debtor lapses under Section 9515 with respect to all
secured parties of record.
   (h) Except as otherwise provided in subdivision (i), the filing
office shall perform the acts required by subdivisions (a) to (e),
inclusive, at the time and in the manner prescribed by filing-office
rule, but not later than two business days after the filing office
receives the record in question.
   (i) Subdivisions (b) and (h) do not apply to a filing office
described in paragraph (1) of subdivision (a) of Section 9501.
  SEC. 40.  Section 9524 of the Commercial Code is amended to read:
   9524.  Delay by the filing office beyond a time limit prescribed
by this chapter is excused if both of the following conditions are
satisfied:
   (1) The delay is caused by interruption of communication or
computer facilities, war, emergency conditions, failure of equipment,
or other circumstances beyond control of the filing office.
   (2) The filing office exercises reasonable diligence under the
circumstances.
  SEC. 41.  Section 9525 of the Commercial Code is amended to read:
   9525.  (a) Except as otherwise provided in subdivision (d), the
fee for filing and indexing a record under this chapter is set forth
in subdivisions (a), (b), and (c) of Section 12194 of the Government
Code.
   (b) The number of names required to be indexed does not affect the
amount of the fee in subdivision (a).
   (c) The fee for responding to a request for information from the
filing office, including for issuing a certificate showing whether
there is on file any financing statement naming a particular debtor,
is as follows:
   (1) Ten dollars ($10) if the request is communicated in writing.
   (2) Five dollars ($5) if the request is communicated by another
medium authorized by a rule adopted by the filing office.
   (d) This section does not require a fee with respect to a record
of a mortgage which is effective as a financing statement filed as a
fixture filing or as a financing statement covering as-extracted
collateral or timber to be cut under subdivision (c) of Section 9502.
  However, the recording and satisfaction fees that otherwise would
be applicable to the record of the mortgage apply.
  SEC. 42.  Section 9608 of the Commercial Code is amended to read:
   9608.  (a) If a security interest or agricultural lien secures
payment or performance of an obligation, the following rules apply:
   (1) A secured party shall apply or pay over for application the
cash proceeds of collection or enforcement under Section 9607 in the
following order to:
   (A) The reasonable expenses of collection and enforcement and, to
the extent provided for by agreement and not prohibited by law,
reasonable attorney's fees and legal expenses incurred by the secured
party.
   (B) The satisfaction of obligations secured by the security
interest or agricultural lien under which the collection or
enforcement is made.
   (C) The satisfaction of obligations secured by any subordinate
security interest in or other lien on the collateral subject to the
security interest or agricultural lien under which the collection or
enforcement is made if the secured party receives an authenticated
demand for proceeds before distribution of the proceeds is completed.

   (2) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the
interest or lien within a reasonable time.  Unless the holder
complies, the secured party need not comply with the holder's demand
under subparagraph (C) of paragraph (1).
   (3) A secured party need not apply or pay over for application
noncash proceeds of collection and enforcement under Section 9607
unless the failure to do so would be commercially unreasonable.  A
secured party that applies or pays over for application noncash
proceeds shall do so in a commercially reasonable manner.
   (4) A secured party shall account to and pay a debtor for any
surplus, and except as otherwise provided in subdivision (b) of
Section 9626, the obligor is liable for any deficiency.
   (b) If the underlying transaction is a sale of accounts, chattel
paper, payment intangibles, or promissory notes, the debtor is not
entitled to any surplus, and the obligor is not liable for any
deficiency.  Subdivision (b) of Section 701.040 of the Code of Civil
Procedure relating to the payment of proceeds applies only if the
security agreement provides that the debtor is entitled to any
surplus.
  SEC. 43.  Section 9611 of the Commercial Code is amended to read:
   9611.  (a) In this section, "notification date" means the earlier
of the date on which:
   (1) A secured party sends to the debtor and any secondary obligor
an authenticated notification of disposition.
   (2) The debtor and any secondary obligor waive the right to
notification.
   (b) Except as otherwise provided in subdivision (d), a secured
party that disposes of collateral under Section 9610 shall send to
the persons specified in subdivision (c) a reasonable authenticated
notification of disposition.
   (c) To comply with subdivision (b), the secured party shall send
an authenticated notification of disposition to all of the following
persons:
   (1) The debtor.
   (2) Any secondary obligor.
   (3) If the collateral is other than consumer goods to both of the
following persons:
   (A) Any other person from which the secured party has received,
before the notification date, an authenticated notification of a
claim of an interest in the collateral.
   (B) Any other secured party or lienholder that, 10 days before the
notification date, held a security interest in or other lien on the
collateral perfected by the filing of a financing statement with
respect to which all of the following apply:
   (i) It identified the collateral.
   (ii) It was indexed under the debtor's name as of that date.
   (iii) It was filed in the office in which to file a financing
statement against the debtor covering the collateral as of that date.

   (C) Any other secured party that, 10 days before the notification
date, held a security interest in the collateral perfected by
compliance with a statute, regulation, or treaty described in
subdivision (a) of Section 9311.
   (d) Subdivision (b) does not apply if the collateral is perishable
or threatens to decline speedily in value or is of a type
customarily sold on a recognized market.
   (e) A secured party complies with the requirement for notification
prescribed in subparagraph (B) of paragraph (3) of subsection (c) if
it satisfies both of the following conditions:
   (1) Not later than 20 days or earlier than 30 days before the
notification date, the secured party requests, in a commercially
reasonable manner, information concerning financing statements
indexed under the debtor's name in the office indicated in
subparagraph (B) of paragraph (3) of subdivision (c).
   (2) Before the notification date, the secured party either:
   (A) Did not receive a response to the request for information.
   (B) Received a response to the request for information and sent an
authenticated notification of disposition to each secured party or
other lienholder named in that response whose financing statement
covered the collateral.
  SEC. 44.  Section 9613 of the Commercial Code is amended to read:
   9613.  Except in a consumer-goods transaction, the following rules
apply:
   (1) The contents of a notification of disposition are sufficient
if the notification does all of the following:
   (A) It describes the debtor and the secured party.
   (B) It describes the collateral that is the subject of the
intended disposition.
   (C) It states the method of intended disposition.
   (D) It states that the debtor is entitled to an accounting of the
unpaid indebtedness and states the charge, if any, for an accounting.

   (E) It states the time and place of a public disposition or the
time after which any other disposition is to be made.
   (2) Whether the contents of a notification that lacks any of the
information specified in paragraph (1) are nevertheless sufficient is
a question of fact.
   (3) The contents of a notification providing substantially the
information specified in paragraph (1) are sufficient, even if the
notification includes either of the following:
   (A) Information not specified by that paragraph.
   (B) Minor errors that are not seriously misleading.
   (4) A particular phrasing of the notification is not required.
   (5) The following form of notification and the form appearing in
subdivision (3) of Section 9614, when completed, each provides
sufficient information:


                  NOTIFICATION OF DISPOSITION OF COLLATERAL

   To:
__________________________________________________________________
               (Name of debtor, obligor, or other person to which
                            the notification is sent)

   From:
_______________________________________________________________
                      (Name, address, and telephone number of
                                   secured party)

   Name of Debtor(s):
_________________________________________________
                        (Include only if debtor(s) are not an
addressee)
   (For a public disposition:)
   We will sell (or lease or license, as applicable)
   the ________________________ (to the highest qualified bidder in
public
         (describe collateral)
   as follows:)

   Day and Date:  _________________________

   Time: __________________________________

   Place: _________________________________

   (For a private disposition:)
   We will sell (or license, as applicable) the
________________________
                                                  (describe
collateral)
   privately sometime after
___________________________________________.
                                           (day and date)
   You are entitled to an accounting of the unpaid indebtedness
secured
   by the property that we intend to sell (or lease or license, as
   applicable) (for a charge of $____).  You may request an
accounting
   by calling us at
__________________________________________________.
                                     (telephone number)

  SEC. 45.  Section 9615 of the Commercial Code is amended to read:
   9615.  (a) A secured party shall apply or pay over for application
the cash proceeds of disposition under Section 9610 in the following
order to each of the following:
   (1) The reasonable expenses of retaking, holding, preparing for
disposition, processing, and disposing, and, to the extent provided
for by agreement and not prohibited by law, reasonable attorney's
fees and legal expenses incurred by the secured party.
   (2) The satisfaction of obligations secured by the security
interest or agricultural lien under which the disposition is made.
   (3) The satisfaction of obligations secured by any subordinate
security interest in or other subordinate lien on the collateral and
to the satisfaction of any subordinate attachment lien or execution
lien pursuant to subdivision (b) of Section 701.040 of the Code of
Civil Procedure if both of the following conditions are satisfied:
   (A) The secured party receives from the holder of the subordinate
security interest or other lien an authenticated demand for proceeds
or notice of the levy of attachment or execution before distribution
of the proceeds is completed.
   (B) In a case in which a consignor has an interest in the
collateral, the subordinate security interest or other lien is senior
to the interest of the consignor.
   (4) A secured party that is a consignor of the collateral if the
secured party receives from the consignor an authenticated demand for
proceeds before distribution of the proceeds is completed.
   (b) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the
interest or lien within a reasonable time.  Unless the holder does
so, the secured party need not comply with the holder's demand under
paragraph (3) of subdivision (a).
   (c) A secured party need not apply or pay over for application
noncash proceeds of disposition under Section 9610 unless the failure
to do so would be commercially unreasonable.  A secured party that
applies or pays over for application noncash proceeds shall do so in
a commercially reasonable manner.
   (d) If the security interest under which a disposition is made
secures payment or performance of an obligation, after making the
payments and applications required by subdivision (a) and permitted
by subdivision (c), both of the following apply:
   (1) Unless paragraph (4) of subdivision (a) requires the secured
party to apply or pay over cash proceeds to a consignor, the secured
party shall account to and pay a debtor for any surplus except as
provided in Section 701.040 of the Code of Civil Procedure.
   (2) Subject to subdivision (b) of Section 9626, the obligor is
liable for any deficiency.
   (e) (1) If the underlying transaction is a sale of accounts,
chattel paper, payment intangibles, or promissory notes, both of the
following apply:
   (A) The debtor is not entitled to any surplus.
   (B) The obligor is not liable for any deficiency.
   (2) Subdivision (b) of Section 701.040 of the Code of Civil
Procedure relating to the payment of proceeds and the liability of
the secured party applies only if the security agreement provides
that the debtor is entitled to any surplus.
   (f) The surplus or deficiency following a disposition is
calculated based on the amount of proceeds that would have been
realized in a disposition complying with this chapter to a transferee
other than the secured party, a person related to the secured party,
or a secondary obligor if both of the following apply:
   (1) The transferee in the disposition is the secured party, a
person related to the secured party, or a secondary obligor.
   (2) The amount of proceeds of the disposition is significantly
below the range of proceeds that a complying disposition to a person
other than the secured party, a person related to the secured party,
or a secondary obligor would have brought.
   (g) The following rules apply with respect to a secured party that
receives cash proceeds of a disposition in good faith and without
knowledge that the receipt violates the rights of the holder of a
security interest or other lien that is not subordinate to the
security interest or agricultural lien under which the disposition is
made:
   (1) The secured party takes the cash proceeds free of the security
interest or other lien.
   (2) The secured party is not obligated to apply the proceeds of
the disposition to the satisfaction of obligations secured by the
security interest or other lien.
   (3) The secured party is not obligated to account to or pay the
holder of the security interest or other lien for any surplus.
  SEC. 46.  Section 9625 of the Commercial Code is amended to read:
   9625.  (a) If it is established that a secured party is not
proceeding in accordance with this division, a court may order or
restrain collection, enforcement, or disposition of collateral on
appropriate terms and conditions.
   (b) Subject to subdivisions (c), (d), and (f), a person is liable
for damages in the amount of any loss caused by a failure to comply
with this division.  Loss caused by a failure to comply may include
loss resulting from the debtor's inability to obtain, or increased
costs of, alternative financing.
   (c) Except as otherwise provided in Section 9628, a person that,
at the time of the failure, was a debtor, was an obligor, or held a
security interest in or other lien on the collateral may recover
damages under subdivision (b) for its loss.
   (d) A debtor whose deficiency is eliminated under Section 9626 may
recover damages for the loss of any surplus.  However, in a
transaction other than a consumer transaction, a debtor or secondary
obligor whose deficiency is eliminated or reduced under Section 9626
may not otherwise recover under subdivision (b) for noncompliance
with the provisions of this chapter relating to collection,
enforcement, disposition, or acceptance.
   (e) In addition to any damages recoverable under subdivision (b),
the debtor, consumer obligor, or person named as a debtor in a filed
record, as applicable, may recover five hundred dollars ($500) in
each case from any of the following persons:
   (1) A person that fails to comply with Section 9208.
   (2) A person that fails to comply with Section 9209.
   (3) A person that files a record that the person is not entitled
to file under subdivision (a) of Section 9509.
   (4) A person that fails to cause the secured party of record to
file or send a termination statement as required by subdivision (a)
or (c) of Section 9513.
   (5) A person that fails to comply with paragraph (1) of
subdivision (b) of Section 9616 and whose failure is part of a
pattern, or consistent with a practice, of noncompliance.
   (6) A person that fails to comply with paragraph (2) of
subdivision (b) of Section 9616.
   (f) A debtor or consumer obligor may recover damages under
subdivision (b) and, in addition, five hundred dollars ($500) in each
case from a person that, without reasonable cause, fails to comply
with a request under Section 9210.  A recipient of a request under
Section 9210 which never claimed an interest in the collateral or
obligations that are the subject of a request under that section has
a reasonable excuse for failure
           to comply with the request within the meaning of this
subdivision.
   (g) If a secured party fails to comply with a request regarding a
list of collateral or a statement of account under Section 9210, the
secured party may claim a security interest only as shown in the list
or statement included in the request as against a person that is
reasonably misled by the failure.
  SEC. 47.  Section 9626 of the Commercial Code is amended to read:
   9626.  (a) In an action arising from a transaction, other than a
consumer transaction, in which the amount of a deficiency or surplus
is in issue, the following rules apply:
   (1) A secured party need not prove compliance with the provisions
of this chapter relating to collection, enforcement, disposition, or
acceptance unless the debtor or a secondary obligor places the
secured party's compliance in issue.
   (2) If the secured party's compliance is placed in issue, the
secured party has the burden of establishing that the collection,
enforcement, disposition, or acceptance was conducted in accordance
with this chapter.
   (3) Except as otherwise provided in Section 9628, if a secured
party fails to prove that the collection, enforcement, disposition,
or acceptance was conducted in accordance with the provisions of this
chapter relating to collection, enforcement, disposition, or
acceptance, the liability of a debtor or a secondary obligor for a
deficiency is limited to an amount by which the sum of the secured
obligation, expenses, and attorney's fees exceeds the greater of
either of the following:
   (A) The proceeds of the collection, enforcement, disposition, or
acceptance.
   (B) The amount of proceeds that would have been realized had the
noncomplying secured party proceeded in accordance with the
provisions of this chapter relating to collection, enforcement,
disposition, or acceptance.
   (4) For purposes of subparagraph (B) of paragraph (3), the amount
of proceeds that would have been realized is equal to the sum of the
secured obligation, expenses, and attorney's fees unless the secured
party proves that the amount is less than that sum.
   (5) If a deficiency or surplus is calculated under subdivision (f)
of Section 9615, the debtor or obligor has the burden of
establishing that the amount of proceeds of the disposition is
significantly below the range of prices that a complying disposition
to a person other than the secured party, a person related to the
secured party, or a secondary obligor would have brought.
   (b) In a consumer transaction, the following rules apply:
   (1) In an action in which a deficiency or a surplus is an issue:
   (A) A secured party has the burden of proving compliance with the
provisions of this chapter relating to collection, enforcement,
disposition, and acceptance whether or not the debtor or a secondary
obligor places the secured party's compliance in issue.
   (B) If a deficiency or surplus is calculated under subdivision (f)
of Section 9615, the secured party has the burden of establishing
that the amount of proceeds of the disposition is not significantly
below the range of prices that a complying disposition to a person
other than the secured party, a person related to the secured party,
or a secondary obligor would have brought.
   (2) The debtor or any secondary obligor is liable for any
deficiency only if all of the following conditions are met:
   (A) It is not otherwise agreed or otherwise provided in the Retail
Installment Sales Act (Chapter 1 (commencing with Section 1801),
Title 2, Part 4, Division 3, Civil Code), and, in particular, Section
1812.5 of the Civil Code or any other statute.
   (B) The debtor and obligor were given notice, in accordance with
Sections 9611, 9612, and 9613, or Section 9614, as applicable, of the
disposition of the collateral.
   (C) The collection, enforcement, disposition, and acceptance by
the secured party were conducted in good faith and in a commercially
reasonable manner.
   (3) Upon entry of a final judgment that the debtor or obligor is
not liable for a deficiency by reason of paragraph (2) or subdivision
(f) of Section 9615, the secured party may neither obtain a
deficiency judgment nor retain a security interest in any other
collateral of the debtor or obligor that secured the indebtedness for
which the debtor or obligor is no longer liable.
   (4) If, subsequent to a disposition that does not satisfy any one
or more of the conditions set forth in paragraph (2), or subsequent
to a disposition that is subject to subdivision (f) of Section 9615,
the secured party disposes pursuant to this section of other
collateral securing the same indebtedness, the debtor or obligor may,
to the extent he or she is no longer liable for a deficiency
judgment by reason of paragraph (2) or subdivision (f) of Section
9615, recover the proceeds realized from the subsequent dispositions,
as well as any damages to which the debtor may be entitled if the
subsequent disposition is itself noncomplying or otherwise wrongful.

   (5) Nothing herein shall deprive the debtor of any right to
recover damages from the secured party under subdivision (b) of
Section 9625, or to offset any such damages against any claim by the
secured party for a deficiency, or of any right or remedy to which
the debtor may be entitled under any other law.  A debtor or obligor
in a consumer transaction shall not have any damages owed to it
reduced by the amount of any deficiency that would have resulted had
the disposition of the collateral by the secured party been conducted
in conformity with this division.
   (6) The secured party shall account to the debtor for any surplus,
except as provided in Section 701.040 of the Code of Civil
Procedure.
  SEC. 48.  Section 9702 of the Commercial Code is amended to read:
   9702.  (a) Except as otherwise provided in this chapter, this
division applies to a transaction or lien within its scope, even if
the transaction or lien was entered into or created before this
division takes effect.
   (b) Except as otherwise provided in subdivision (c) and in
Sections 9703 to 9709, inclusive, both of the following rules apply:

   (1) Transactions and liens that were not governed by former
Division 9, were validly entered into or created before July 1, 2001,
and would be subject to this act if they had been entered into or
created after July 1, 2001, and the rights, duties, and interests
flowing from those transactions and liens remain valid after July 1,
2001.
   (2) The transactions and liens may be terminated, completed,
consummated, and enforced as required or permitted by this division
or by the law that otherwise would apply if this division had not
taken effect.
   (c) This division does not affect an action, case, or proceeding
commenced before July 1, 2001.
  SEC. 49.  Section 9705 of the Commercial Code is amended to read:
   9705.  (a) If action, other than the filing of a financing
statement, is taken before July 1, 2001, and the action would have
resulted in priority of a security interest over the rights of a
person that becomes a lien creditor had the security interest become
enforceable before July 1, 2001, the action is effective to perfect a
security interest that attaches under this division on or before
July 1, 2002.  An attached security interest becomes unperfected on
July 1, 2002, unless the security interest becomes a perfected
security interest under this division before that date.
   (b) The filing of a financing statement before July 1, 2001, is
effective to perfect a security interest to the extent the filing
would satisfy the applicable requirements for perfection under this
division.
   (c) This division does not render ineffective an effective
financing statement that, before July 1, 2001, is filed and satisfies
the applicable requirements for perfection under the law of the
jurisdiction governing perfection as provided in former Section 9103.
  However, except as otherwise provided in subdivisions (d) and (e)
and in Section 9706, the financing statement ceases to be effective
at the earlier of either of the following:
   (1) The time the financing statement would have ceased to be
effective under the law of the jurisdiction in which it is filed.
   (2) June 30, 2006.
   (d) The filing of a continuation statement after July 1, 2001,
does not continue the effectiveness of the financing statement filed
before July 1, 2001.  However, upon the timely filing of a
continuation statement after July 1, 2001, and in accordance with the
law of the jurisdiction governing perfection as provided in Chapter
3 (commencing with Section 9301), the effectiveness of a financing
statement filed in the same office in that jurisdiction before July
1, 2001, continues for the period provided by the law of that
jurisdiction.
   (e) Paragraph (2) of subdivision (c) applies to a financing
statement that, before July 1, 2001, is filed against a transmitting
utility and satisfies the applicable requirements for perfection
under the law of the jurisdiction governing perfection as provided in
former Section 9103 only to the extent that Chapter 3 (commencing
with Section 9301) provides that the law of a jurisdiction other than
the jurisdiction in which the financing statement is filed governs
perfection of a security interest in collateral covered by the
financing statement.
   (f) A financing statement that includes a financing statement
filed before July 1, 2001, and a continuation statement filed after
July 1, 2001, is effective only to the extent that it satisfies the
requirements of Chapter 5 (commencing with Section 9501) for an
initial financing statement.
  SEC. 50.  Section 9707 of the Commercial Code is amended and
renumbered to read:
   9708.  A person may file an initial financing statement or a
continuation statement under this chapter if both of the following
conditions are satisfied:
   (1) The secured party of record authorizes the filing.
   (2) The filing is necessary under this chapter to do either of the
following:
   (A) To continue the effectiveness of a financing statement filed
before July 1, 2001.
   (B) To perfect or continue the perfection of a security interest.

  SEC. 51.  Section 9707 is added to the Commercial Code, to read:
   9707.  (a) In this section, "pre-effective-date financing
statement" means a financing statement filed before the date that
this section becomes operative.
   (b) After the date this section becomes operative, a person may
add or delete collateral covered by, continue or terminate the
effectiveness of, or otherwise amend the information provided in, a
pre-effective-date financing statement only in accordance with the
law of the jurisdiction governing perfection as provided in Chapter 3
(commencing with Section 9301).  However, the effectiveness of a
pre-effective-date financing statement also may be terminated in
accordance with the law of the jurisdiction in which the financing
statement is filed.
   (c) Except as otherwise provided by subdivision (d), if the law of
this state governs perfection of a security interest, the
information in a pre-effective-date financing statement may be
amended after the date this section becomes operative only if any of
the following occur:
   (1) The pre-effective-date financing statement and an amendment
are filed in the office specified in Section 9501.
   (2) An amendment is filed in the office specified in Section 9501
concurrently with, or after the filing in that office of, an initial
financing statement that satisfies subdivision (c) of Section 9706.
   (3) An initial financing statement that provides the information
as amended and satisfies subdivision (c) of Section 9706 is filed in
the office specified in Section 9501.
   (d) If the law of this state governs perfection of a security
interest, the effectiveness of a pre-effective-date financing
statement may be continued only under subdivisions (d) and (f) of
Section 9705 or Section 9706.
   (e) Whether or not the law of this state governs the perfection of
a security interest, the effectiveness of a pre-effective-date
financing statement filed in this state may be terminated after the
date that this section becomes operative by filing a termination
statement in the office in which the pre-effective-date financing
statement is filed, unless an initial filing statement that satisfies
subdivision (c) of Section 9706 has been filed in the office
specified by the law of the jurisdiction governing perfection as
provided in Chapter 3 (commencing with Section 9301) as the office in
which to file a financing statement.
  SEC. 52.  Section 9708 of the Commercial Code is amended and
renumbered to read:
   9709.  (a) This division determines priority of conflicting claims
to collateral.  However, if the relative priorities of the claims
were established before July 1, 2001, former Division 9 (commencing
with Section 9101) determines priority.
   (b) For purposes of subdivision (a) of Section 9322, the priority
of a security interest that becomes enforceable under Section 9203
dates from July 1, 2001, if the security interest is perfected under
this division by the filing of a financing statement before July 1,
2001, which would not have been effective to perfect the security
interest under former Division 9 (commencing with Section 9101).
This subdivision does not apply to conflicting security interests
each of which is perfected by the filing of such a financing
statement.
  SEC. 53.  Section 12183 of the Government Code is amended to read:

   12183.  The Secretary of State shall charge and collect the
following fees for certification:
   (a) Certification of a document:  Five dollars ($5).
   (b) Certificate of status or filing:  Five dollars ($5).
   (c) Certificate of information:  Ten dollars ($10) if the request
is communicated in writing, and five dollars ($5) if the request is
communicated by another medium authorized by a rule adopted by the
office of the Secretary of State.
  SEC. 54.  Section 12194 of the Government Code is amended to read:

   12194.  The fees for filing liens pursuant to the Code of Civil
Procedure and for filing financing statements and other Uniform
Commercial Code filings are the following:
   (a) Ten dollars ($10) if the record is communicated in writing and
consists of one or two pages.
   (b) Twenty dollars ($20) if the record is communicated in writing
and consists of more than two pages.
   (c) Five dollars ($5) if the record is communicated by another
medium authorized by a rule adopted by the office of the Secretary of
State.
   (d) Two dollars ($2) if the record is a state tax lien certificate
of release.
   The Secretary of State shall collect a special handling fee for
filing records in the manner provided in Section 12182.
   Financing statements and other Uniform Commercial Code filings
shall be submitted on national standard forms as approved by the
office of the Secretary of State.
  SEC. 55.  Section 27291 is added to the Government Code, to read:
   27291.  (a) Notwithstanding any provision of Chapter 5 (commencing
with Section 9501) of Division 9 of the Commercial Code or any other
provision of law, a financing statement to perfect a security
interest or agricultural lien may, at the election of the recorder
and subject to the conditions of subdivision (b), be recorded instead
of filed.
   (b) A recorder may elect to record a financing statement if all of
the following apply:
   (1) The recorder employs a system of microphotography, optical
disk, or other reproduction system that does not permit additions,
deletions, or other changes to the permanent record of the original
document.
   (2) All film used in the microphotography process complies with
minimum standards of quality approved by the United States Bureau of
Standards and the American National Standards Institute.
   (3) A true copy of the microfilm, optical disk, or other storage
medium is kept in a safe and separate place for security purposes.
   (c) A certified copy of any record stored or retained on
microfilm, optical disk, or other reproduction system pursuant to
this section shall be admissible in any court to the same extent as
the original record.
  SEC. 56.  The provisions of this act, exclusive of Sections 18, 21,
24, 27, and 32 shall become operative on July 1, 2001.
